Don’t Be Fooled by Trump’s Smoke and Mirrors on Child Care and Paid Leave
This evening Donald Trump is expected to announce his proposals to address maternity leave and child care assistance. Unfortunately, Trump’s latest attempt to appeal to everyday workers is a new coat of paint on a tired message. Wealthy people like Trump and his children benefit the most, while working parents struggle to make ends meet. At face value, Trump’s plans appear to address the lack of paid leave and growing cost of child care. But when you look beneath the surface, these plans do not actually support working families. Trump announced four proposals.
“The Trump Plan will rewrite the tax code to allow working parents to deduct from their income taxes child care expenses for up to four children and elderly dependents.
The deduction is available for taxpayers who take the standard deduction as well as itemize deductions, and will be capped at the average cost of care for the state of residence. Individuals earning more than $250,000 (or $500,000 if filing jointly) will not be eligible for the deduction.
The plan will offer child care spending rebates to lower-income taxpayers through the existing Earned Income Tax Credit (EITC). This could mean as much as $1,200 per year per eligible family.
Mr. Trump’s plan will ensure stay-at-home parents receive the same tax deduction as working parents, offering compensation for the job they’re already doing, and also allowing them to choose the child care scenario that’s in their best interest.”
Since he first announced a child care plan in August to widespread criticism, Trump has given it a fresh coat of paint. But it is still a regressive tax deduction that benefits wealthy families more than struggling working families. Under Trump’s plan, a middle-income family making $60,000 would get a deduction worth 15 percent of their child care costs, while a wealthy family making $500,000 would get a deduction worth almost 40 percent. In terms of real numbers, the wealthy family would get a tax break worth 2.64 times more than the tax break for the middle-class family.
The $1,200 “rebate” that Trump is offering low-income families is too little too late. Parents have to pay their child care bills on a weekly or monthly basis. If they don’t have the money to pay for child care upfront and wait until the following year for their refund, they can’t take advantage of the so-called “rebate.” Moreover, child care costs can top $10,000 annually in many states. Two parents working minimum wage jobs would still have to pay over 20 percent of their income just to send their child to a child care center. Trump is proposing to cover only a small portion of the cost and less than the $5,000 that is provided as a child care subsidy to families who can access the under-funded Child Care and Development Block Grant program that exists today to help low-income working families afford child care.
“The Trump plan would create new Dependent Care Savings Accounts (DCSAs) so that families can set aside extra money to foster their children’s development and offset elder care for their parents or adult dependents. These new accounts are available to everyone, and allow both tax-deductible contributions and tax-free appreciation year-to-year — unlike current law Dependent Care Flexible Spending Accounts (FSAs), which are available only if it is offered by an employer and does not allow balances to accumulate.
When established for a minor, funds from a DCSA can be applied to traditional childcare, after-school enrichment programs and school tuition — contributing to school choice. To help lower-income parents, the government will match half of the first $1,000 deposited per year.
When established for an elderly dependent, a DCSA can cover a variety of services, including in-home nursing and long-term care.”
Trump’s Dependent Care Savings Accounts proposal is a huge tax loophole that renders the income cap meaningless for Trump’s child care tax deduction and gives a huge new tax cut for those at the top. Since contributions to these accounts are tax deductible, families making more than $500,000 can effectively deduct their childcare costs by first funneling the money through the account.
But it gets even worse. Rich families could also use these accounts to take tax deductions for everything from private school tuition, to horseback riding lessons, to live-in domestic workers. This would make huge amounts of income tax-free for the richest Americans. Meanwhile, middle-class families, who cannot afford nannies and private lessons, will get little or no tax benefit from Trump’s proposed DCSA.
Additionally, this will likely function as a tax shelter for wealthy families, while struggling families will not be able to afford to set aside much money in these accounts. Savings incentives are already upside-down in the tax code, meaning that tax subsidies are larger for higher-income taxpayers who need them the least. This proposal only makes the problem worse.
At a time when 46% of Americans do not even have $400 in savings to cover an emergency, Trump’s tax-sheltered savings accounts will not help the many struggling families who cannot afford to save the tens of thousands of dollars needed for child care. This will be just one more tool that wealthy families can use to avoid taxes on their investment income.
“Mr. Trump’s plan will provide regulatory reform to promote new family-based and community-based solutions, and also add incentives for employers to provide child care at the workplace.”
Quality standards in child care are critical to keeping children safe and giving parents peace of mind. In 2014, Congress passed bipartisan legislation to require background checks for child care providers and require states to conduct basic on-site monitoring visits. These health and safety standards are badly needed. Children have died or been seriously injured in child care facilities that do not meet health and safety standards. In addition to ensuring children are safe, such standards also provide accountability for taxpayer dollars that support child care assistance.
And while child care plays an important role in supporting businesses and our economy as a whole, businesses alone cannot solve our child care crisis. For small business owners and independent contractors in today’s gig economy, employer provided child care is not always an option. We need a national solution that broadly addresses access to affordable, high-quality child care.
“The Trump plan will guarantee six weeks of paid maternity leave by amending the existing unemployment insurance (UI) that companies are required to carry. The benefit would apply only when employers don’t offer paid maternity leave, and would be paid for by offsetting reductions in the program so that taxes are not raised.”
There is little doubt that working families need access to paid maternity leave, including to care for a new child. Trump’s proposal is so paltry and unrealistic that it would be laughable if this weren’t such an important topic. While he is characteristically light on the details, his paid maternity leave proposal apparently only covers birth mothers — leaving out fathers, adoptive parents, and workers who need access to paid leave to address their own serious health concerns or to care for seriously ill family members. In addition to ignoring the needs of the majority of the workforce, conservative economists are already on the record stating that maternity-only leave would likely will lead to employment discrimination and a larger gender wage gap for women of childbearing age.
In addition to not coming close to addressing the breadth of real challenges facing working families, Trump is proposing to administer his proposed program through an already beleaguered unemployment insurance system — but without any new funding. It is nearly impossible to imagine this working out well for two reasons. First, the unemployment system is dramatically underfunded today. Only 18 states have the minimum recommended level of reserves in their UI trust funds, and we saw the ramifications of this during the recession when 36 states depleted their trust funds and had to take out loans to finance benefits. Simply adding paid maternity leave on top of state UI systems is likely to be insufficient. This leads to the second problem — there is no way to compel states to participate. Given the fact that so many state UI systems are underfunded, dealing with outdated infrastructure (some still use paper!), or both, this is too much to ask them to take on — so many won’t. This would result in a piecemeal system where some states had programs while others did not, compounding the inequities we already see.
We’re sure to hear more lofty rhetoric from the Trump campaign as we get closer to Election Day. He is down in the polls and badly needs to appeal to working families, especially considering his opponent is a long-time proponent of work-family policies with a robust plan to cap family child care payments at 10 percent of household income and provide 12 weeks of paid family and medical leave for a range of circumstances. Trump’s plans amount to smoke and mirrors, and voters need to hold him accountable for that and dig beyond clever messaging.