“In today’s economy, when having both parents in the workforce is an economic necessity for many families, we need affordable, high-quality childcare more than ever. It’s not a nice-to-have — it’s a must-have. So it’s time we stop treating childcare as a side issue, or as a women’s issue, and treat it like the national economic priority that it is for all of us.”– President Obama, State of the Union Address, January 20, 2015
In his 2015 State of the Union Address, President Obama outlined his plan to make affordable, quality child care available to every working and middle-class family with young children. This plan includes:
- Making a landmark investment in the Child Care and Development Fund that helps every eligible family with young children afford high-quality child care.
- Tripling the maximum child care tax credit to $3,000 per young child.
- Creating a new innovation fund to help states design programs that better serve families that face unique challenges in finding quality care, such as those in rural areas or working non-traditional hours.
About tax law changes the administration proposes:
- Cutting taxes for families paying child care with a credit of up to $3,000 per child. The President’s tax proposal would streamline child care tax benefits and triple the maximum child care tax credit for middle class families with young children, increasing it to $3,000 per child. The President’s child care tax proposals would benefit 5.1 million families, helping them cover child care costs for 6.7 million children (including 3.5 million children under five), through the following reforms:
- Triple the maximum Child and Dependent Care Tax Credit (CDCTC) for families with children under five, increasing it to $3,000 per child. Families with young children face the highest child care costs. Under the President’s proposal, they could claim a 50 percent credit for up to $6,000 of expenses per child under five.
- Make the full credit available to most middle-class families. Under current law, almost no families qualify for the maximum CDCTC. The President’s proposal would make the maximum credit – for young children, older children, and elderly or disabled dependents – available to families with incomes up to $120,000, meaning that most middle-class families could easily determine how much help they can get.
- Eliminate complex child care flexible spending accounts and reinvest the savings in the improved CDCTC. The President’s proposal would replace the current system of complex and duplicative incentives with one generous and simple child care tax benefit.
Is this a good plan? Not everyone thinks it is. Senator Mike Lee (R-UT), who claims to favor helping America’s working and middle-class families, writes:
The problem with the president’s proposal is that he wants to cut taxes for only one particular type of family.
Specifically, the president proposed a new $500 tax credit only for families with two incomes, and he called for an increase in the child-care tax credit. That is, he wants to use the tax code to reward two-income couples who put their children in commercial day care, while leaving behind couples who choose to have mom or dad stay at home.
The $500 tax credit Senator Lee mentions doesn’t appear in the administration’s fact sheet, but no matter–Senator Lee’s objection is clearly this: in the name of even-handedness, he would have any credit benefit rich and poor alike–those who need help and those who don’t. Lee writes:
Under my plan, families would be eligible for the credit regardless of whether they had one income or two, or whether they used commercial day care or chose to have mom or dad stay home with the kids.
What each family did with the money would be up to them, not the government, as it should be.
There is a big difference here–the administration’s plan would help working families with necessary expenses; Lee’s proposal amounts to a subsidy to all parents raising children.
Lee goes on to allege unfairly high taxes for families with children. He writes:
Today, parents effectively pay into the senior entitlement programs twice: once through their payroll taxes and again in bearing the costs of raising their children — the next generation of payroll taxpayers. An expanded child credit would not create a new distortion in the tax code, but correct an existing one.
This is bizarre indeed–“senior entitlement program” is a euphemism for Social Security. Lee suggests people become parents and bear the costs of child rearing to create future taxpayers who will fund their retirement. The idea that payroll taxes and child care costs are duplicative and the idea that parents raise children to fund their future SS benefits are both nonsense.
© William Hungerford – January 2015