The price tag of raising a child in the United States is well over $200,000 these days, in part because of skyrocketing child-care costs. These costs vary widely state to state, according to the Economic Policy Institute; center-based care for 4-year-olds ranges from $4,493 a year in Arkansas to nearly $18,980 a year in D.C. But across the board, child care is putting significant financial strain on parents.
The high costs have made the child tax credit a crucial benefit for millions of families across America. Since it was first established in 1997, the benefit has undergone many changes, but President Biden’s American Rescue Plan most recently increased the credit for the tax year 2021. As a result, parents can now receive $3,600 per child under the age of 6 and $3,000 per child ages 6 to 17 every year. Checks will start hitting the bank accounts of roughly 39 million American families starting July 15, the administration announced earlier this month.
But many people don’t realize there can be a hidden penalty for solo parents.
The enhanced payments of the child tax credit begin phasing out as people reach certain income levels: $75,000 a year for people filing as individuals; $112,500 for those filing as heads of household, the most common designation used by single parents; and $150,000 for married couples who file jointly.
Rep. Katie Porter (D-Calif.), a single mother herself, is now trying to fix the issue with the Single Parent Penalty Elimination Act, which she introduced earlier this month alongside Reps. Ayanna Pressley (D-Mass.) and Don Beyer (D-Va.). In her view, the penalty ends up hurting children. “No child ought to receive less help just because of the marital status of their parents,” Porter told The Lily. “The purpose of this bill is to help make sure that children have access to adequate housing, nutritious food and high-quality child care.”
The legislation would restructure the tax code to increase the threshold of the phaseout to $150,000 for everyone, regardless of marital status and how they file their taxes. Ending the penalty could benefit hundreds of thousands of single-parent families, according to estimates by Shawn Fremstad, a senior policy fellow at the Center for Economic and Policy Research.
The liberal think tank has endorsed the Single Parent Penalty Elimination Act because “kids are expensive. Single parents, particularly, are going to be dependent on child care,” Fremstad said. He added: “This policy is based on a recognition that kids are valuable and we should treat them equally.”
Republicans have historically opposed the expansion of benefits such as the child tax credit, although in recent years they’ve been moving toward creating alternatives that could offset these costs. For example, Sen. Josh Hawley (R-Mo.) recently introduced a proposal that would create a new “parent tax credit” of $12,000 a year for married couples and $6,000 for solo parents — as long as parents reported earnings of $7,540 for the prior year.
Porter, one of the only single parents in Congress, argued that restructuring the tax code can make a real difference for solo parents. According to a hypothetical example presented by Porter, a married couple with an annual household income of $150,000 would receive $4,800 under the child tax credit for their three children ages 2, 4 and 5. However, a solo parent with three children of the same ages and with similar expenses but whose annual household income is $135,000 would only receive $1,425 under the current system.
Advocates also say one of the reasons the penalty must be eliminated is because it is implicitly gendered: About 81 percent of solo parents are women, according to the Pew Research Center. The gender disparity is even sharper among single parents who are Black — about 89 percent are mothers.
“Eliminating this penalty would go a long way to equalizing the tax code,” said C. Nicole Mason, president and chief executive of the Institute for Women’s Policy Research. She argued implicit biases baked into the United States’ public policy come from a lack of representation in the halls of power.
The blind spots that come with a lack of congressional representation has meant solo parents like Michelle, who spoke on the condition that only her first name be used because she is a survivor of domestic violence, can be left behind. For most of her children’s life, the 53-year-old said, she has fretted about how to keep her family afloat. Early in her career, Michelle left the West Coast in search of a job. But her pursuit of financial stability meant she would be far away from her immediate family, who could help with raising her three children.
As a result, Michelle relied heavily on paid child care for her kids — the youngest is now 12 and her oldest is 20 — as she spent long hours in the office and traveled for work, she said. She went through two marriages, and both of her husbands were financially unsupportive, according to Michelle.
Michelle said she has taken advantage of the tax benefits offered to parents as much as she can — including the child tax credit. “These policies are in place to help support parents like me,” she said. But she always wondered why the benefit began phasing out at a lower income for parents like her compared with married couples.
“It’s so much harder for a solo parent,” she said. “There’s not anyone for me to fall back on.”
On top of child-related expenses, the gender wage gap and the motherhood penalty, solo mothers also tend to face volatility in their income. A media professional, Michelle said her salary was around $75,000 when her first son was born two decades ago. Since then, it’s been as high as $175,000, but these days it is around $115,000. She has faced layoffs and worries often about the dwindling number of jobs in her industry. “It’s so scary as a sole provider for three children, knowing that everything is on my shoulders,” she said. “It’s so scary not to be able to trust that the companies that employ me will continue to employ me.”
Although Michelle won’t benefit as much from closing the single-parent loophole, she said it’s crucial that something is done to help other solo parents. “Every bit counts,” she said. “Taxation supports good in our country, but there are so many ways in which systems are set up that are outdated.”
Other supporters of the Single Parent Penalty Elimination Act say ending the penalty would also go a long way toward ensuring women’s long-term economic security. This goal has become more urgent than ever in the past year, which had a devastating effect on mothers, forcing millions out of the workforce.
“What the pandemic has revealed is all the cracks in many of our systems, including the tax system,” said Mason, of the Institute for Women’s Policy Research. “Taking a moment to make these fixes that would make a world of difference for working women and their families, who have faced a disproportionate amount of losses, is the right thing to do. It will set us on the path to creating a more equitable and just economy.”