Trump’s Child-Care Plan May Fail to Reach Low-Income Americans

  • Tax-deductible savings accounts are key part of nominee’s plan
  • ‘If you’re low income, it’s not like you can float $1,200’

Little People, Big Bills: The Rising Cost of Childcare

Republican presidential nominee Donald Trump’s plan to help families cope with child-care costs has the potential to trim household bills, but low-income workers are unlikely to realize the full benefits and some people could be discouraged from joining the labor force.

The billionaire businessman’s proposed child-care savings accounts will be tough for poor Americans to take advantage of because they’ll have difficulty coming up with the tax-deductible contributions. Stay-at-home parents will receive the same tax deduction as working parents, the campaign said Tuesday, a policy that raises questions about the incentives to join the labor force amid a drop in the participation rate over the past decade.

That would leave the plan’s impact on the broader economy mixed, with Trump also proposing alleviating child-care costs through tax deductions and rebates, and a mandated six weeks of paid maternity leave. While varying widely by state, child-care bills outpace rent and tuition in most of the country.

“If you’re low income, it’s not like you can float $1,200 until you reach the tax refund,” said Michael Madowitz, an economist who has studied child-care cost issues at the Washington-based Center for American Progress. Still, the initial details of the plan are a “good effort,” he said.

Trump’s campaign says lower-income parents will benefit from a government match of the first $1,000 deposited per year, as well as child-care spending rebates through the existing Earned Income Tax Credit. The Republican nominee will join daughter Ivanka at a Tuesday evening event in the Philadelphia suburb of Aston to discuss more of the plan.

CAP, which has ties to liberal Democratic groups and to Democratic presidential nominee Hillary Clinton, released child-care proposals in November that focused on providing a tax credit on a sliding scale based on income, which would allow Americans to “pay these bills as they’re coming in,” Madowitz said.

Clinton’s Plan

Clinton has offered her own basket of proposals to alleviate child-care costs, including an expansion of the Child Tax Credit, subsidization of pre-kindergarten for all 4-year-olds and scholarships of as much as $1,500 for parents in school. She’s also pledged to limit the costs of care to no more than 10 percent of household income, but has offered little detail about how to guarantee that.

Aparna Mathur, a resident scholar at the conservative-leaning American Enterprise Institute in Washington, also found reasons to cheer Trump’s elevation of the issue while raising questions about how his programs would work or be funded.

“I like the fact that there is a Republican candidate talking about paid leave,” Mathur said.

At the same time, Trump’s pitch to focus on maternity leave might run afoul of the gender neutrality in the Family and Medical Leave Act, and also could unintentionally set back gender parity in the workforce by discouraging employers from hiring women, she said.

The number of stay-at-home fathers almost doubled to 2 million in 2012 from 1.1 million in 1989, according to Census Bureau figures compiled by the Washington-based Pew Research Center. Meanwhile, the labor-force participation rate has fallen among both women and men over the past decade.

Tax Incentives

The proposals Tuesday build on tax and regulation details Trump revealed during a speech last month at the Detroit Economic Club and on Ivanka Trump’s pitch at the July Republican National Convention to make child care “affordable and accessible for all.” Following his Detroit pitch, some child-care advocates, including Mathur, were critical of how the tax incentives might not reach those who need them most. 

Mathur praised the idea of expanding the tax credit but remains concerned that the latest plans might provide too many hurdles for low-income Americans to benefit, including needing the cash to make the proposed Dependent Care Savings Account worth it. The variety of proposals also risks overwhelming Americans trying to understand which benefits they’d be eligible for, she said. And Mathur doubts that Trump can implement the policies without raising taxes.

The proposed rebate through the Earned Income Tax Credit program would require changing a current law that caps the credits’ financial benefit, said Elaine Maag, a researcher at the Urban-Brookings Tax Policy Center in Washington.

Trump policy adviser Stephen Miller didn’t immediately respond to e-mailed requests to clarify the latest plans, such as how the average cost of care per state would be determined and the potential impact of equalizing the benefits for stay-at-home and working parents.

— With assistance by Kevin Cirilli, Lynnley Browning, and Jennifer Jacobs

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