Trump’s Proposed Child Care Plan Leaves Out Those in Poverty
Ashley Burnside, Emerson Hunger Fellow via the Congressional Hunger Center
March 28, 2017
Affordable child care is an issue deeply impacting families in poverty. As a fellow working on tax policy for RESULTS, I have been shocked to learn about the rising rates for child care in the United States. The costs of child care have skyrocketed in recent years, to the point that it now costs more than the average cost of in-state college tuition at $9,589 a year for full-time child care. This forces many low-income families to make a difficult choice between working and taking care of their children.
During his Joint Address to Congress in February, President Trump announced his plans to increase access to child care. As a candidate, he released a Child Care Plan in September describing how he would supplement costs of child care. The plan was spearheaded and endorsed by his daughter Ivanka Trump.
The plan would rewrite the tax code to allow parents to deduct more child care expenses in some of their tax payments. Unfortunately, this plan would benefit the wealthy and leave many low-income families without the funding to access necessary child care.
The Child Care Plan can be broken down into three different tax benefits:
- Earned Income Tax Credit (EITC) for Child Care Expenses: Through the EITC some families would be eligible for a partially refundable tax credit for child care expenses. The credit would equal 7.65% of those child care expenses and could not exceed half of the amount paid in payroll taxes. Couples making $62,400 or less and single parents making $31,200 or less would be eligible for this option.
- Tax Deduction for Families: This allows parents to deduct child care expenses for up to four children under 13 years old in their taxes. These expenses would be limited to whatever the average cost of child care is in their state. This deduction is available to any married couple that makes $500,000 or less in income and to any single parent making $250,000 or less in income – however, most low-income families would not benefit from this deduction since they do not have federal income tax liability.
- Savings Account: This allows families to open Dependent Care Savings Accounts (DCSAs), which would not be taxed, to pay for expenses of their children or elderly dependents. For lower-income families, the government would match 50% of deposits up to $1,000 per year.
While these options sound promising, the distribution of funding is not equitable based on income. Any funding based on taxes automatically benefits families of higher incomes because their tax sums are higher. According to the Tax Policy Center, more than 70 percent of the tax benefits from the plan would go to families who make more than $100,000 annually. More than 25 percent of these benefits would go to families with incomes greater than $200,000. The maximum credit a low-income family could receive is $1,200, but many families would receive even less than that. You can use this tool created by Vox to figure out how much your family would benefit from President Trump's proposed Child Care Plan.
In particular, while higher income families would benefit greatly from an increased tax deduction, the expanded EITC to help with child care expenses would not come close to addressing real child care costs, and would come as a lump sum when many families struggle to pay for quality child care on a monthly basis. The National Women’s Law Center also concludes that the DCSAs are inaccessible to low-income families because living paycheck to paycheck makes it challenging to put money aside into a savings account.
While it is encouraging that our new president is talking about the struggle to pay for child care, doing so through tax deductions prevents families of the lowest income brackets from accessing these funds. With 70 percent of the funds benefitting families making $100,000 or more, it is clear that President Trump’s plan will greatly benefit wealthier families and leave low-income families behind.