No Simple Solution
While no other state quite matches Louisiana’s affordability, some have recently introduced similar plans. New York and North Carolina both passed new budgets including expanded childcare tax credits. In the meantime, President Trump’s multipronged childcare proposalwould allow couples making up to $500,000, and single parents earning up to $250,000, to deduct childcare costs from their taxable income. Critics say the deductions help only families that make enough money to have a tax liability, not low- to middle-class families who don’t. “Deductions tend to help higher-income people more because they pay higher tax rates.” Plans like this can lower their rates significantly, says Heidi Hartmann, Ph.D., president and founder of the DC-based nonpartisan Institute for Women’s Policy Research.
Hartmann points to a recent report from nonpartisan think tank Tax Policy Center that says families with incomes below $40,000 would see after-tax income grow by $20 or less. More than 70 percent of the total benefits would go to families with income above $100,000—and 25 percent to families making above $200,000.
Trump’s policy would also expand dependent-care savings accounts, which allow people to put money aside, tax-free, for childcare costs. The government would even match the first $1,000. But saving that amount of money is difficult—if not impossible—for many low-income families. Plus, “the new tax savings accounts can be used for almost any child-related activity, like music lessons or summer camps, which the rich spend more on than the poor,” says Hartmann.
Also of note: The deduction, which will be capped at the average cost of childcare in your state, can be taken “even if one parent is staying home to provide care and isn’t paying cash for childcare at all,” says Hartmann. Since this is not available to families claiming the tax credit, it will be used only by richer families, she explains.
Positives to the plan include the Earned Income Tax Credit. Lower-income families who don’t have a tax liability (so can’t get the deduction) would be eligible for up to $1,200 in spending rebates. “This extra cash will allow families more daycare choice and help them get better quality care,” says Aparna Mathur, Ph.D., a resident scholar in economic policy studies at the American Enterprise Institute, a conservative-leaning think tank in Washington, DC. Detractors, though, say that amount barely makes a dent in annual childcare fees.
As families wait to see how the government will ease their financial burden, at least they’re satisfied with the quality of care, no matter what that dismal 2006 study says. Nearly 60 percent of parents believe their child receives “excellent” care, according to the report, Child Care and Health in America by NPR, the Robert Wood Johnson Foundation and the Harvard T. H. Chan School of Public Health.
Lauren Gard of Wayne, PA, a Philadelphia suburb, pays $1,200 a month for her 19-month-old son’s care and is among the satisfied. The public relations exec says, “It’s expensive, but knowing he’s in the hands of energetic, responsible and compassionate caregivers makes it worthwhile for me.”
