UPDATED: Murphy signs bill into law expanding child care tax credit for families earning up to $150K – NJ.com

New Jersey families who earn as much as $150,000 a year may apply for an expanded tax credit next year that will lower the cost of their child care expenses under a bill that sailed through both houses of the state Legislature Thursday and Gov. Phil Murphy signed into law Friday.

The bill (S4065) was introduced on Nov. 8, less than a week after the Nov. 2 election that cost Democrats — the majority party in Trenton — seven seats in the state Legislature.

Pundits and politicians interpreted the results in part as a commentary of how expensive it is to live in New Jersey — a theme Republican gubernatorial challenger Jack Ciattarelli hammered home against Murphy, the Democratic incumbent. Murphy won by 3 percentage points, a closer margin than polls predicted.

The bill passed the state Assembly 77-0 and the state Senate 35-0 on Thursday afternoon. Murphy acted 24 hours later to make the tax credit law Friday afternoon.

“This legislation will help ensure affordable access to childcare, a critical part of getting hardworking New Jerseyans back into the workforce and reversing the ‘she-cession’ caused by the pandemic,” Murphy said in a statement announcing the legislation’s enactment.

The cost and availability of child care has been a prime concern throughout the pandemic, as New Jersey’s unemployment rate is 7%, the second highest in America. In October, Murphy dedicated $700 million in federal pandemic assistance to help parents pay for child care, give bonuses to child care workers and dole out grants to child care centers.

A Care.com national survey of 3,000 parents this year found 94% of parents said they had cut back on child care expenses by reducing their hours at work, changing jobs or leaving the workforce. The average cost of weekly child care services for a toddler was $340 last year in the nation, the survey found.

“Over the pandemic, major childcare issues have been exacerbated. With parents rapidly returning to work while the pandemic continues, childcare is now more important than ever,” the Assembly sponsors of the bill, led by Assemblywoman Gabriella Mosquera, said in a statement. “Allowing families to reclaim some of their money spent on childcare will enable parents to transition back to work with one less thing to worry about.”

New Jersey already has a tax credit program for child care that is based on the federal child care tax credit, but under current law the credit cannot exceed $500 per person and $1,000 for two or more people. Under the new legislation, families earning as much as $150,000 could claim a share of the tax credit, an expansion from the current $60,000 annual salary limit. The tax credit also would be refundable, meaning a family would receive a refund if the credit amount is larger than their tax bill.

The expanded program is expected to benefit 80,000 more families, benefitting “an increasing number of women (who) are leaving or not returning to the workforce,” Assembly Speaker Craig Coughlin, D-Middlesex, said.

“Expansion of New Jersey’s Child and Dependent Care Tax Credit will provide the needed breathing room to help families afford childcare, reflecting our commitment to meaningfully support our working families and tackling affordability,” Coughlin said.

The bill has the backing of the New Jersey Business and Industry Association, said its director of Government Affairs Alexis Bailey.

“Childcare access is a cornerstone of our economic recovery as we emerge from the pandemic,” Bailey said. “New Jersey continues to face unprecedented workforce shortages across all industries. Nationally, our participation rate among female workers is at its lowest point in three decades. Any legislation like this that can increase childcare access will help our state.”

Peter Chen, senior policy analyst for New Jersey Policy Perspective, predicted the tax credit would help reduce the “back-breaking” cost of child care, which he said consumes 34% of income among poor families.

“Expanding the child and dependent care tax credit will put money back in the pockets of parents and caretakers who face staggering annual childcare costs, which are often as high as in-state college tuition,” Chen said.

“Although this is only a one-year change and a small part of addressing New Jersey’s child care crisis, the expanded credit is a critical lifeline for families struggling to care for the state’s youngest children — and a step toward making this a more just and equitable state that treats working people with dignity,” Chen added.

Enacting the legislation would cost the state $76.2 million this year, according to a fiscal analysis by the nonpartisan New Jersey Office of Legislative Services.

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Susan K. Livio may be reached at slivio@njadvancemedia.com. Follow her on Twitter @SusanKLivio.