Donald Trump’s proposal to give parents a tax deduction for child care costs sends an appealing message to a wide swath of voters, but the policy still lacks concrete detail and the benefits would likely elude the poorest households.
The GOP nominee’s proposal to allow parents to “fully deduct the average cost of child care spending from their taxes,” unveiled in an economic policy speech in Detroit on Monday, has left policy experts hungry for details on how exactly the deduction would work and how it would affect the existing tax credit for children.
Trump said his campaign will parse its new economic proposals in greater detail in the coming weeks.
In the most broad terms, Trump’s economic plan is intended to push the United States in pro-growth direction, said Demian Brady, director of research at the center-right National Taxpayers Union Foundation, in an interview. But, he said, so far it’s not clear what the child care deduction would do on a practical level.
“As with many Trump proposals, he’s a little bit vague on the details,” Brady said.
Trump is likely using the proposal to woo women voters, he said, noting that it came on the heels of Trump’s daughter Ivanka’s convention speech hailing her father as an advocate for working women. The majority of women are still sour on the GOP candidate, with 63 percent of female voters viewing him unfavorably in Morning Consult’s newest poll, taken during the past weekend.
“This was thrown in more for political reasons to reach out to new constituents who might have been turned off by his statements and actions over the last couple of months,” Brady said.
The tax code currently offers parents relief from child-rearing costs in the form of a child and dependent care credit, allowing parents to deduct up to $3,000 for one child or up to $6,000 for two or more children. It’s possible, Brady said, that Trump intends to replace that credit with his proposed deduction and remove the cap.
“I’m assuming that he would replace this credit with a new deduction,” he said.
But about 35 percent of earning households don’t pay income taxes, he said, which would limit poorer households’ access to the deduction — a point left-leaning advocates have seized on, dismissing Trump’s proposal as paying lip service to working families.
“A tax deduction for child care expenses is an ineffective method of getting financial support to the people that need it most, to the families that need it most who are lower- and moderate-income,” Steve Savner, director of public policy at the left-leaning Center for Community Change, said in an interview.
Wealthier taxpayers also tend to itemize their deductions more than low-income taxpayers, which means that the lower-income earners are less likely to see benefits from targeted deductions like this one, he said.
Hillary Clinton’s proposal to cap child care expenses at 10 percent of family income would help more families, he said.
“It’s broader and much more targeted toward the people who need it most,” he said. “The crucial difference is that she proposes to actually put a cap on the amount of a family’s income that could go or would need to go toward child care, and presumably make up the difference with subsidies, either direct or through the tax system.”
Robertson Williams, a senior fellow at the centrist Urban-Brookings Tax Policy Center, said in an interview that it’s not yet clear where the deduction would fall in the tax-paying pipeline, particularly if taxpayers don’t itemize their deductions.
“Do you put it before you measure adjusted gross income, or do you have a deduction that’s available to anybody?” he said. “The question is: Who’s going to benefit from this?”
Trump’s proposal also raises questions on how he would handle the existing tax credit for families with children, he said.
“Does he keep that tax credit, or does he get rid of that?” Williams said. “The credit is more beneficial to some people than his deduction would be.”
He also said the Trump tax plan unveiled last fall would slash the tax rolls by 63 percent. A proposal in that plan to quadruple the standard deduction would likely prompt nine out of 10 taxpayers to stop itemizing their deductions, he said.
Less than one-third of taxpayers (about 30 percent) itemize their deductions now, he said.
“With the big standard deduction, a lot of people have no taxable income, so being able to deduct more in the expenses for childcare wouldn’t help them at all,” Williams said.