It’s quite the boon for high-income Americans.
By Dwyer Gunn
(Photo: Darren McCollester/Getty Images)
Earlier this week, at a campaign event in the suburbs of Philadelphia, Donald Trump announced a series of proposals targeted at working families, especially the women voters who have so far been reluctant to embrace his candidacy. Trump’s plan, which he teased at an economic speech in Detroit earlier this year, calls for six weeks of guaranteed paid maternity leave (to be provided through state unemployment insurance programs) and a series of tax deductions and credits to defray the costs of childcare.
A fact sheet on the Trump campaign’s website claims his plan is “not for the wealthy, but rather provides the biggest benefit to working- and middle-class families.” The campaign also cites childcare expenses as the most costly for many families; on the matter of women, it explains that Trump has employed thousands of women in his empire, and as such “understands the needs of the modern workforce.”
Before getting into the policy specifics, it’s worth pausing for a moment to appreciate the fact that this proposal does represent progress, of a sort. The United States is the only country in the developed world that doesn’t guarantee paid maternity leave, and Republicans have traditionally been opposed to any proposals to institute such policies. Similarly, childcare costs in this country are much higher, and government investments in childcare much lower, than in most other developed countries. It’s past time for these issues to become bipartisan causes.
But unfortunately, the Trump plan falls well short of its stated goal of helping working- and middle-class families.
For starters, says Elaine Maag, a senior research associate at the non-partisan Urban-Brookings Tax Policy Center, it’s regressive, from a tax code perspective. The centerpiece of the plan is a proposal to make childcare costs (up to the average cost of care in the state) tax-deductible for those making up to $250,000 (for individuals) or $500,000 (for couples filing jointly). Families in which one spouse stays home to provide childcare would still be able to take the deduction, a component of the proposal that has drawn praise from conservative, pro-family groups.
“This would be a big boon for higher-income families, and it would not do as much for low-income families.”
But the benefits of the plan would disproportionately accrue to high-income Americans, since they tend to pay higher tax rates. “This would be a big boon for higher-income families, and it would not do as much for low-income families,” Maag says.
Low-income working families, meanwhile, most of whom earn too little to benefit from the proposed deduction, would instead be eligible for an expanded tax credit through the Earned Income Tax Credit (up to $1,200). However, according to the Tax Policy Center’s reading of the proposal, low-income families in which one parent doesn’t work would not be eligible for any assistance through the expanded EITC credit, since the credit is based on the payroll taxes of the lower earner. “If you’re in a married couple, and one of you is not working, you will qualify for no assistance through this expanded EITC,” Maag says.
The plan also calls for the creation of Dependent Care Savings Accounts—essentially tax-advantaged flexible savings accounts that allow parents to set aside money for childcare or elder care (a rather broad category, including traditional childcare, after-school enrichment activities, and private school tuition). Under Trump’s proposal, the government would match up to $500 per year. These accounts, however, are unlikely to be relevant for low- and some middle-income families, many of whom are too busy trying to pay their bills every month to set aside savings for childcare.
Maag also worries that the accounts might morph into tax shelters for high- income parents. “The way it’s spelled out on the campaign site, it looks like there’s no limitation for how much you can set aside, and it can grow tax-free,” Maag says. “So you can imagine an extreme scenario where you have a high-income parent who’s already planning on sending their child to private school for K-12, and then to a private university. And they can just start putting money in this account, escape taxes on it, and watch it grow tax-free.”
Beyond its regressive nature, many are arguing that the proposal simply isn’t big enough, broad enough, or comprehensive enough. A $1,200 credit for low-income families (which they would receive many months after the expenses were incurred), for example, is pretty inadequate in the face of childcare costs that now exceed $10,000 a year on average.
Vivien Labaton, the co-director of Make It Work Action, a non-partisan advocacy organization that doesn’t endorse political candidates, is particularly unimpressed with the maternity leave component of Trump’s plan. She argues that six weeks is barely enough time to recover from childbirth and that a family leave policy that doesn’t extend to men is behind the times.
“More and more men are doing their part at home and want and need paid time off to be with their kids,” Labaton says. “This proposal really reflects a really outdated notion of women’s roles in the workplace and of men’s roles in the family.”
Trump’s plan also doesn’t address the other major childcare problem facing America today: quality. That is, Trump’s plan includes no mention of the women and men who actually care for our children. And Labaton is skeptical that the quality issue can be addressed without a more comprehensive government investment in childcare.
“I think fundamentally you can’t make quality childcare affordable for the vast majority of working families through tax credits alone,” she says. “In order to make quality childcare affordable in this country, you do need a significant government childcare investment.”
