How to Make Child Care Affordable
Cute, but costly.
Donald Trump and Hillary Clinton agree on this much: The federal government should do more to help families pay for child care.
They’re surely right. In many parts of the U.S., putting children in a day-care center has become the single greatest expense parents face, exceeding the cost of housing. And it’s growing: From 2009 to 2016, the cost of child care and nursery school jumped 21 percent, nearly twice the rate of inflation overall.
Trump’s proposed solution is to allow parents to deduct the average cost of child care from their taxes. That may sound like a generous offer, and it would indeed be expensive. The trouble is, it would do nothing for families most in need of help. After all, the median household pays just $9,000 in federal taxes; 45 percent pay no federal income tax at all. (Trump’s campaign says he will also extend the deduction to half of payroll taxes, and will provide details about this plan later on.)
In theory, Clinton’s strategy would help many more families. She promises to limit the amount parents pay for child care to 10 percent of their income. But her campaign hasn’t said how she would achieve that goal, or at what cost.
Some expansion in federal assistance is certainly needed. The existing income-tax credit for child care costs is limited to $600 to $1,050 per child, depending on income. Yet the average price of home day care for an infant ranges from almost $5,000 a year in Tennessee and South Carolina to twice that in Florida, New York and Massachusetts. Child-care centers are typically even more expensive: In many states, the annual cost to cover an infant and a four-year-old together is more than $20,000.
Beyond enlarging the tax credits, the federal government should pay them in advance -- much as Obamacare provides subsidies for health insurance premiums at the time they need to be paid. And as with Obamacare subsidies, child-care tax credits should be paid directly from the government to child-care centers.
The Center for American Progress has proposed such an approach. Its plan would offer tax credits of as much as $14,000 per child, and limit families’ spending on child care to 12 percent of their income.
Any changes in federal policy would do well to also raise the quality of child care. The country’s 285,000 child care workers earn less than $21,000 a year on average; even so, only a third of infant care settings meet the staffing ratios that experts recommend. And more than one-third of workers at home-based child care centers have only a high school degree or less. While a four-year college degree isn’t always required, workers ideally should study child development and early childhood education -- courses offered at many community colleges.
Trump’s child-care tax deduction wouldn’t directly affect quality. Clinton says she would improve things with a separate effort to subsidize the pay of child care workers. A better approach would be to also give day care centers an incentive to perform well. Louisiana, for example, gives them a tax credit tied to their state quality rating. It also gives child care workers a separate credit that increases with the amount of training they complete.
Another approach is to make it easier for parents to get information about staff training before enrolling their children in a day-care center.
Of course, none of these strategies would be cheap. CAP says its tax credit proposal would cost taxpayers $40 billion annually. But kids who get quality day care at an early age often do better in school, and their parents are more likely to work. These benefits could be well worth the price.
To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at email@example.com.