In the new year, questions remain about the future of President Joe Biden’s massive “Build Back Better” plan. As Democrats hoped the bill would pass, West Virginia Sen. Joe Manchin poured cold water on their hopes and said fellow Democrats should fundamentally rethink their approach.
What does this mean for families?
Much of the Biden administration’s hopes to reduce the financial burden on parents centered on the “Build Back Better” law. Proponents of the bill have touted its contribution to household budgets across the country and across the economic divide. Like NBC reported, “The law includes provisions, ranging from paid vacations to funding universal pre-kindergarten, that would be particularly beneficial to low- and middle-income households,” according to Kris Cox, deputy director of federal fiscal policy at the Center on Budget. and Political Priorities.
None of these initiatives seem likely to materialize any time soon.
What could lawmakers and the Biden administration do to help families in the meantime? One easy piece of legislation that would significantly help middle-class budgets is a change in IRS regulations to allow more Americans to set aside pre-tax money from their paychecks to pay for fees. childcare such as daycare, preschool, or summer camp.
Last year’s American Rescue Plan Act raised the pre-tax contribution limits for flexible spending accounts for dependents for calendar year 2021, in addition to increasing the value of the tax credit for dependents for 2021.
In 2021 alone, annual pre-tax contribution limits increased to $10,500 (from $5,000) for single taxpayers and married couples filing jointly, and to $5,250 (from $2,500 ) for married persons declaring separately. At the end of 2021, the limits automatically reverted to $5,000. This return to a $5,000 limit has been painful for a number of middle-class American families.
Last year Shannon Ford, Ms. Universe 2021 and mother in Florida, used a dependent savings account for her son. She told me, “It basically allowed us to budget for her daycare/preschool without thinking too much. If the lower amount had been in place, I think it would have been more difficult. We reach $10,000 easily with one child. But putting it aside allowed us to save more.
With inflation, parents across the country are feeling the pinch. The $5,000 limit will only help Erin, a California mother of a baby girl, for about four months. After that, saving for childcare becomes much more difficult and complicated. It’s part of his family’s calculation to move from California to somewhere with a lower cost of living, to allow the $5,000 to stretch further.
With the state of the economy and the pressures on parents from COVID-19, financial stress is breaking some families apart. Marilyn, a mother of three in Las Vegas, told me that in addition to paying $40,000 a year in private school tuition (which is not an allowable expense in savings accounts for dependents), she also pays more than $12,000 a year for preschool education (which is allowed).
“The cost of child care is insane and COVID has made it worse. It takes my breath away that I can protect $19,500 in a 401(k) for retirement, but God forbid I have a break trying to pay for child care,” she said. .
As lawmakers consider how to move forward with next steps to help American families — with or without the Build Back Better Act — allowing parents a limit of $10,500, or more, on savings accounts for dependents is a quick and easy solution that would make a significant impact on the budgets of stressed and strained families.
Bethany Mandel is a staff writer for Deseret News and managing editor at Ricochet.com.