Sensenbrenner: Reducing dependent care costs gives families a hand
On average, Wisconsin parents pay more than $9,000 each year for child care. That is nearly as much as one year of in-state tuition at the University of Wisconsin — Madison.
As Wisconsin families know, our state ranks among the most expensive for child care. In fact, only nine states have greater child care costs in the United States. We must ease the heavy burden these high costs are placing on the shoulders of hard-working families.
Wisconsin has more licensing requirements and regulations than other states, which drives up costs for care providers. Providers then pass on those increased costs to consumers.
Consider the average annual cost of child care in Wisconsin — nearly $12,000 in a child care center.
The median income for a married couple in Wisconsin is roughly $82,000, meaning child care consumes more than 11% of their annual earnings. The median income for a single mother-led family is roughly $23,000, so child care consumes nearly 39% of her annual earnings. These statistics present a troubling reality for families throughout the state, one in which they must choose between quality child care and daily essentials such as food, housing and transportation.
That is a decision no parent should ever have to make. The government should be encouraging hardworking people to start families, not punishing them.
High dependent care costs not only impact families; they also strain businesses. According to the “Parents and the High Cost of Child Care 2014 Report,” on average, U.S. businesses lose $3 billion annually due to absenteeism caused by gaps in dependent care coverage. The report also notes that when affordable quality care is available to working parents and caregivers their productivity increases at the workplace and professional absences are significantly reduced.
We must do everything possible to ensure that our nation’s businesses have every advantage to succeed and grow. A focused, present workforce is a critical component of that success, and it is imperative we do what we can to promote work, which includes finding solutions to the growing problem of high dependent care costs.
So what can be done to reduce costs and give Wisconsin families a hand up?
While many aspects of this issue must be addressed on the state level, there are significant actions Congress can and should take to help make dependent care more affordable.
I recently re-introduced the Working Parents Tax Relief Act — legislation that amends the Internal Revenue Service Code in order to help make the cost of dependent care more affordable for Wisconsin families.
Under the employer-sponsored Dependent Care Assistance Program, eligible employees may reduce their taxable income by setting aside money from their paycheck to pay for dependent care expenses, including child care, elder care, and extended care. The money set aside is pretax, which lowers an individual’s taxable income and ultimately saves families money.
This bill will play a small role in lessening the burden on Wisconsin families.
Currently, individuals may only set aside $5,000 per year. This limit has been in effect since 1986, despite the fact the cost of care has increased significantly. Under the current rules, program participants also are unable to rollover unused funds to the next year. My bill increases the amount available under the Dependent Care Assistance Program from $5,000 to $7,500, indexes the benefit amount to inflation, and allows program participants to rollover unused funds into the following year.
The cost of reliable, quality dependent care, especially child care, has risen dramatically over the years, and Wisconsin’s costs are disproportionately higher than the national average. Changes to the DCAP are necessary to help spur economic growth and security while giving our hard-working families a hand up and ensuring our businesses have a focused and productive workforce.
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