Having kids is an expensive proposition.
And one of the biggest costs for working parents is child care.
A recent poll found that more than 1/3 of parents surveyed said high child-care costs hurt their family financially.
Want to see how much child care typically costs in your state? Check here.
But how to solve the problem is a matter of intense debate, thanks to fundamental differences in philosophy.
Earlier this month, Republicans and Democrats both pitched ways to make it more affordable and accessible, using very different tactics.
First daughter and adviser to the president Ivanka Trump — with the assistance of Sen. Marco Rubio’s office — proposed expanding an already-existing tax credit.
Meanwhile, democratic senators Patty Murray, Bob Casey and Bobby Scott unveiled the “Child Care for Working Families Act.”
So what’s the difference between the two child-care approaches?
The Washington Post nicely summarized it like this:
“Democrats want to make it an entitlement, similar to social security or Medicare which, they hope, would make the service affordable for every struggling family. … Ivanka Trump (is pushing a plan that) addresses the child-care burden through the tax code. “
Confused about what these plans could mean to you? You’re not alone. We’ve done our best to break it down for you.
A side-by-side comparison:
The Trump plan:
No official proposal has been made publicly available.
- Double the existing child tax credit to $2,000. (Whether this is annually amount is unclear).
- It is unknown whether the credit would apply to all taxpayers or only those below a certain income level, Politico reported.
Here’s some background info about the child tax credit program:
- The child tax credit was signed into law under the Taxpayer Relief Act of 1997 and started at $500.
- President George W. Bush doubled it to $1,000 (which is where it remains today) in 2003.
- The child tax credit has lost 25 percent of its value since 2003 because it is not indexed for inflation, meaning whether the value of the dollar increases or decreases, the $1,000 does not waver, The Hill reported.
COST: The Washington Post reported Americans claimed $55 billion in the credits last year, but the cost for this proposed expansion is undetermined.
WHO PAYS: Unknown.
The Democrats’ plan:
- “No family under 150 percent of state median income spends more than seven percent of their income on child care.”
- As of May 2016, Pew Research Center, a nonpartisan fact tank, found that 29 percent of American adults were considered lower income. Want to see how your income stacks up? Check here.
- Expand the age limit for child care through 13, as opposed to younger than.
- Double the number of children eligible for child-care assistance.
- “Provide incentives and funding for states to create high-quality preschool programs for low- and moderate-income 3- and 4-year-olds during the school day, while providing a higher matching rate
for programs for infants and toddlers.”
- Increase pay to a livable wage for child-care staff and childhood educators.
- The proposal does not define livable wage but says child-care staff should be paid “comparable to wages for elementary educators with similar credentials and experience in the State.”
- “Build more inclusive, high-quality child care providers for children with disabilities, and infants and toddlers with disabilities, including by increasing funding for the Individuals with Disabilities Education Act.”
COST: Democrats estimate about $60 billion over 10 years.
WHO PAYS: Unknown.
But wait — Didn’t everyone say the tax-credit plan only benefits the WEALTHY?
You’re probably thinking of Ivanka and Donald Trump’s original child-care proposal: the tax deduction. Read a snippet about it in his contract to the American voter.
In February, Bloomberg reported that plan would cost $500 billion over 10 years.
Economist Alan Cole from the Tax Foundation told Bloomberg the plan would mostly benefit “affluent, dual-income households.”
How’s the tax credit different than the tax deduction?
Allow us to get nerdy for a second, and deep-dive into the details.
A tax deduction reduces your taxable income, also known as your tax liability. It’s applied before you pay taxes. It benefits wealthier families more because they’re in higher tax brackets.
Here’s how the math works: Assume the tax deduction is $2,000.
If you’re in a lower income bracket and pay about 10 percent of your wages to taxes, then you’d save about $200. But if you’re in a higher income bracket, and are taxed at 30 percent, then you’d save about $600.
Critics believe it’s unfair to give wealthy people a bigger break than low-income people because low-income people need the assistance more and wealthier people need it less.
A tax credit, on the other hand, reduces your amount of taxes owed. No matter what tax bracket you pay in, everyone receives the same discount off their final balance. This option saves lower- and middle-class American families more money than the deduction. It sounds perfect, right?
Well, it’s not that easy…
There are refundable tax credits and non-refundable tax credits. So to start off: If the tax credit is $2,000, then no one can take more than that amount off their balance. But what if you pay less than $2,000 in taxes? Do you still reap the benefits of a $2,000 credit?
If you have a refundable tax credit, then yes.
You’ll typically receive the amount back in a similar format to a rebate. But if it’s a non-refundable tax credit (which most are), then you do not reap the same benefit.
What the critics are saying
- Neither side has discussed how its plan will be funded.
- If the tax credit is non-refundable, then the lowest-income Americans who need the assistance most likely will be left out.
- If Donald Trump deregulates child-care centers in an attempt to make them more affordable and accessible for parents, then that could lead to lower quality, dangerous conditions, critics, such as Slate’s Christina Cauterucci argue.
- The child tax credit policy details could be taken over by business-minded conservatives who care more about corporate gain than working families, says the Niskanen Center, a libertarian Washington D.C. based think tank.
- This social-media user voiced concerns over who will pay for the Democratic proposal (the Child Care for Working Families Act), calling universal child care a hand out, not a hand up.
- Others have more grassroots questions, namely: Whose responsibility is it to cover child-care costs?
- One Congressional-hopeful from Colorado had this to say:
Which plan is more likely to succeed?
It’s unclear, but we can lay the framework for the discussion.
Congress consists of a Republican-controlled House and Senate, which means it would likely be very difficult for the Democrats to get their bill on the floor, even with the support of House and Senate minority leaders Nancy Pelosi, D-Calif., and Chuck Schumer, D-New York.
Then again, will financially-minded conservatives eager to push personal or corporate tax breaks to the forefront be willing to mull this child tax credit over? Will they give it the time of day so it can pass?
Your guess is as good as ours.
why is this even an issue right now?
- Families are asking themselves if they can afford to work, as day care becomes too expensive.
- In some cases, child care can cost more than college tuition.
- Minimum-wage workers are sending about 30 percent of their salaries to cover child-care costs.
- Parents working outside the traditional 9-to-5 struggle to find child care.
- Parents who want to get a degree to provide more for their children face difficult when they don’t have or can’t afford child care.
- Stories have surfaced about loop holes within child-care regulations that are creating unsafe conditions for children.