Donald Trump’s New Childcare Plan Would Only Help The Rich

[Native]

https://thinkprogress.org/trump-child-care-proposal-35620a7bbfcd#.ldcn13gp5

His plan is to simply make childcare expenses tax deductible.

...experts say that his plan will do nothing to help low- or even middle-income families, instead solely benefitting the rich who least need help affording child care.

“It’s absolutely regressive,” said Helen Blank, director of childcare and early learning at the National Women’s Law Center.

Tax deductions benefit the wealthy, who usually owe more come April 15. A deduction helps them reduce that amount. But many low-income families don’t owe anything in income taxes because they make too little and qualify for credits that reduce or erase their burdens. Currently, 35 percent of all people filing taxes don’t have a liability come tax time, and Trump has said he wants to significantly expand that number.

It’s the lower- and middle-income families, however, who are paying the greatest share of their income for childcare. Families who live in poverty spend over a third of their monthly income on it, while those living just above the poverty line spend about 20 percent, according to Katie Hamm, senior director for early childhood policy at the Center for American Progress. (ThinkProgress is an editorially independent project of the Center for American Progress Action Fund.) Everyone who makes more, however, spends less than 10 percent of their income on average.

And because there is no cap, the more you pay for child care, the more you benefit.

Thanks for nothing, Ivanka!

[MichiganVote]

1. Yup. Tax dollars for rich little brats who then won't pay their fair share of taxes.

[yellowcanine]

2. Wait - there already is a childcare tax credit.

I thought that a tax credit is generally better for working families than a deduction. Am I wrong?

[Native]

3. No, you aren't wrong. Per the WSJ here's the rub

The focus on child-care costs is relatively new for Mr. Trump. The federal tax code has long provided two primary means for families to receive breaks for child-care costs—a dependent-care spending account that allows workers to put aside as much as $5,000 in pretax income and a dependent-care tax credit. Mr. Obama last year proposed to triple the maximum credit to $3,000 per child.

And on Trump's specific plan:

It wasn’t clear how such a tax break might be structured and whether it would be available to tens of millions of families that don’t pay income taxes because they have lower incomes. Making child-care expenses fully deductible would provide much larger benefits to the wealthiest families that have larger tax bills.

http://www.wsj.com/articles/donald-trump-to-propose-tax-breaks-on-pocketbook-issues-in-economic-plan-1470663478

[Native]

4. Until specifics are made available, there's basically no telling how this will work - per Time Mag..

http://time.com/money/4442985/trump-child-care-tax-plan/?xid=homepage

“There’s really no way to know what it means until the specifics are released,” says CPA Mike Piper and author of the Oblivious Investor blog.

And as for how the deduction might work:

“Would the deduction be an itemized deduction or an ‘above the line’ deduction, which can be claimed even by people using the standard deduction?” says Piper. “Also, would there be an income limit on the deduction? Would it get phased out for taxpayers as their income increases through a certain range (as happens for many tax breaks)?”

Also, lower income families might not benefit from the plan since they don’t pay federal income taxes in the first place.

“If it replaces the credit, it may end up making child care more expensive for certain families, especially those with lower incomes,” says financial planner Matt Becker. “A tax deduction may not be as helpful for those families since their tax rate is low and they would therefore only get a smaller break.”

Bottom line - a deduction does not mean it's free, and it could actually be worse for families with lower incomes.