The Problem
Nearly half of children in Hawai‘i live in households experiencing financial hardship.
While almost 1 in 8 are in poverty, an additional one-third of families in Hawaii aren’t officially poor but still don’t earn enough to afford the basic life essentials.
Many working-age families are choosing to move to the mainland because of the high cost of living here.
There are a number of social services to support struggling families in poverty, but working class families above poverty who still can’t afford the basics often don’t qualify for public benefits.
That’s where tax credits come in. They help people keep more of their hard-earned money, and when targeted for lower- to middle-income families, help reduce financial hardship.
Child and Dependent Care Tax Credit (CDCTC)
The cost of child and dependent care in Hawai'i has skyrocketed. With the average cost of child care in Hawaiʻi exceeding $13,000 per year, families need more support. The Child and Dependent Care Tax Credit (CDCTC) can help, but we need to improve it to ensure that it truly reflects the economic reality of working families.
Last session, our lawmakers took an important first step to boost the CDCTC. They more than quadrupled the maximum *amount* that taxpayers can claim for child and dependent care expenses, from $2,400 for one child/dependent to $10,000 (and from $4,800 for two or more dependents to $20,000).
However, they did not increase the maximum *percent* of care expenses that can be claimed, which is currently capped between 25% for those earning less than $25,000 per year to 15% for those earning more than $50,000. Such a low cap makes it almost impossible for families to access the full amount of the credit.
To allow more working families to benefit from the increase that lawmakers passed last session, we need to increase the percent of care expenses that can be claimed with the CDCTC. We should raise the cap to range between 50% of care expenses for those earning less than $150,000 and 20% for those earning over $225,000.
Helping families afford to enroll their keiki in child care programs also reaps benefits for their parents and our community in other ways:
- Full-time child care programs allow parents to obtain stable employment, which increases the economic well-being of the family as a whole.
- Additionally, early learning programs facilitate the academic and social development of young children and should be supported. Research on the benefits of quality early learning programs indicates that for every $1 invested in such opportunities, society saves $4 to $8 on remedial classes, special education, welfare programs, and criminal justice costs.