You Know That Childcare Tax Deduction? -- It Might Buy Some Families 1 Happy Meal

teacher with young kids in class
The Trump administration's childcare proposal made headlines back in August 2016 with its plan to make the average cost of childcare spending tax-deductible -- and now it's in the news again. Unfortunately, the main problem with this plan, which is part of what Treasury Secretary Steve Mnuchin is saying will be the "largest tax reform in the history of our country," hasn't changed: Because parents would receive the subsidy as a bracket-based tax deduction, higher-income families would benefit more -- and lower-income families would benefit very little. In fact, according to one recent analysis, they would hardly benefit at all.


This new analysis -- from the Center for American Progress -- is particularly interesting because it focuses on potential tax cuts under the childcare plan in Trump swing counties. And let's just say the president's voters are not going to be rewarded for their support. 

Analysts discovered that a four-person family with two young children in one of these counties (which are located in Michigan, Minnesota, Iowa, Wisconsin, Pennsylvania, Ohio, and West Virginia) would receive an estimated $5.55 in benefits -- even if they spent more than $6,000 on childcare per year. By comparison, a family of four living on the Upper East Side of Manhattan (Trump's former neighborhood) would get a subsidy more than 1,000 times larger: After deducting the average cost of childcare for two children in NYC (which can run more than $16,000 per child), a household bringing in $295,000 per year (typical for that area) would get $7,329 under the proposal.

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This is how bracket-based tax deductions work, which is exactly the problem: Only the wealthy benefit. And while this perhaps should have seemed obvious from the start, the stark reality of these new numbers ($5.55?!) is still being met with some surprise, Elaine Maag, senior research associate for Urban Institute-Brookings Institution Tax Policy Center, tells CafeMom. 

"My sense is that people are a little bit shocked that so much of the benefits go to higher-income families, and I think it's causing people to reevaluate," she says. 

The irony, of course, is that Trump voters will be among the hardest hit by this plan. So how did this proposal even come to be? Was it created in blatant disregard for lower- and middle-income families, despite Ivanka and her father's claims to care about women and children's interests? Ivanka Trump is still touting childcare and parental leave to Congress. 

"When I'm in more generous moods, I think that maybe when the plan was crafted the people behind it didn't understand that deductions aren't valuable for low- and middle-income families," says Maag.

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From a less "generous" perspective, one might come to the conclusion that this plan is a very deliberate slight from the GOP against poor families. Offering benefits that range from $0 to $20 per year isn't just useless, it's an insult. Meanwhile, the wealthier a wealthy family is and the more spent on childcare, the more money it'll get.

Policies like this stop upward mobility in its tracks and widen an already cavernous class divide. Parents can't advance in their careers if they can't afford childcare -- it's a very simple equation. But policy makers are either clueless to this fact, or just don't care. And so, the wealth remains unevenly distributed ... and perhaps that's the point.

The most frustrating thing is that there are ways the government could help lower- and middle-class families. One "relatively low cost" approach, says Maag, would be to expand the child tax credit so that it starts phasing in at the first dollar of earnings (instead of after a family earns $3,000, which is currently the case) and provide a subsidy paid monthly, at the same time childcare costs are incurred. Another problem with tax deductions, she points out, is that the payout only comes around once a year -- not much of a help to families who are living paycheck to paycheck. 

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"The tax system is very complicated," says Maag.

"Maybe [the original plan] wasn't well thought out. Now that the information is out there hopefully there will be a reaction and something will change."

And thanks to the general outcry this plan has been met with, it does actually seem like change might be possible -- maybe. The Washington Post reports that an unnamed senior administration official said the White House is now considering increasing the the Child and Dependent Care Credit, as experts like Maag have recommended, and limiting how much high-income parents will receive from the credit, in addition to possibly making the credit refundable (so that even low-income families who pay little to no federal income tax could benefit). 

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At least the powers-that-be appear to be listening, sort of -- though we're not getting our hopes up. The Trump administration has thus far shown no real concern for average Americans, or even a cursory knowledge of what it means to be an average American. 

"There certainly has not been any coalescing in Congress about this kind of reform," Maag says of Trump's original proposal. "Response to the plan is very tepid at this point."

"We're sort of in a holding pattern. Is the White House going to put pen to paper and spell out what they want to do?"

It's a question we're asking ourselves far too often these days, regarding far too many very important issues.

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