In his economic policy speech on Monday, Republican presidential nominee Donald Trump is expected to announce a new policy: allowing families to fully deduct the cost of their childcare expenses from their taxes.
The announcement will mark Trump’s first foray into work/family issues and follows up on his daughter Ivanka’s promise during the Republican National Convention that he “will focus on making quality childcare affordable and accessible for all.” But experts say that his plan will do nothing to help low- or even middle-income families, instead solely benefitting the rich who least need help affording child care.
“It’s absolutely regressive,” said Helen Blank, director of childcare and early learning at the National Women’s Law Center.
“It’s absolutely regressive.”
Tax deductions benefit the wealthy, who usually owe more come April 15. A deduction helps them reduce that amount. But many low-income families don’t owe anything in income taxes because they make too little and qualify for credits that reduce or erase their burdens. Currently, 35 percent of all people filing taxes don’t have a liability come tax time, and Trump has said he wants to significantly expand that number.
It’s the lower- and middle-income families, however, who are paying the greatest share of their income for childcare. Families who live in poverty spend over a third of their monthly income on it, while those living just above the poverty line spend about 20 percent, according to Katie Hamm, senior director for early childhood policy at the Center for American Progress. (ThinkProgress is an editorially independent project of the Center for American Progress Action Fund.) Everyone who makes more, however, spends less than 10 percent of their income on average.
Meanwhile, if childcare expenses are fully deductible with no cap at all, the more a family spends on child care the more it benefits. “For folks who are in the upper earning bracket, who have a higher tax rate to begin with, and who are paying more money to have child care options like au pairs for example, those people are likely to receive large cost savings,” said Sarah Jane Glynn, director of women’s economic policy at the Center for American Progress. “Whereas a single working mom who makes around the minimum wage is going to get nothing out of this.”
Speaking of Trump, she added, “It would really help people like him and not help anybody else.”
The country has already tried a child care tax deduction and decided it didn’t work. “We had a tax deduction until the late 70s,” Blank said. “The deduction was made into a credit because a credit is more equitable.” A low-income family can take advantage of a credit, especially if it’s refundable, which allows it to get money back at tax time even if it doesn’t have a tax liability.
The tax code is also a poor tool for easing the burden of increasingly unaffordable child care. Even if it were to help lower-income families, they would only get the benefit of their tax return once a year in a lump sum. But child care expenses are ongoing, bills that usually have to be paid monthly or even weekly.
“It would really help people like him and not help anybody else.”
“Anything that involves realtime ongoing expenses, it’s problematic to only address that through the tax code,” Glynn explained. The only way a family could use a tax benefit to cover childcare would be to squirrel its tax return money away in savings and dole it out over each month to help cover expenses — something that is very difficult to do, particularly for those who live in poverty.
And by nature, a tax deduction on its own won’t address the availability or quality of child care families seek out, nor does it help the providers who often make poverty wages. “Deductions don’t do anything to create a bigger supply [of care] or improve the situation for the workforce,” Blank said.
Trump’s child care proposal comes just days after he publicly announced his economic policy team, a team made up entirely of white men, many of whom are named Steve and a number of whom come from finance and other wealthy backgrounds.
Glynn sees a connection between the makeup of that team and the policy it helped craft. “This is what happens when you have a bunch of rich dudes in a room talking about what working parents need,” she said.