Center for American Progress

The House GOP Tax Bill Does Not Address Child Care Affordability 

The House GOP Tax Bill Does Not Address Child Care Affordability 

The House Republican tax bill makes no substantial improvements to child care assistance for working families and scales back existing programs.

A mother picks up her 2-year-old son at a child development center in Las Vegas. (AP/John Locher)
A mother picks up her 2-year-old son at a child development center in Las Vegas. (AP/John Locher)

Last week, the House Committee on Ways and Means rolled back some of the existing child care benefits in the tax code and failed to expand a child care tax credit. The committee described its tax bill as helping to make child care affordable for families, but the bill does the opposite.

In recent years, the common struggle to find quality, affordable child care has permeated the national policy conversation. During the 2016 election, President Donald Trump and his daughter Ivanka Trump claimed that they wanted to make child care more affordable for low-income and middle-class families.

But the House Republican bill eliminates tax deductions for businesses that provide employer-sponsored child care. Surprisingly, this program was touted by then-candidate Donald Trump as something he planned to expand as president. An earlier version of the bill also eliminated dependent care assistance programs such as the dependent care Flexible Spending Accounts offered by employers, which allow families to pay for up to $5,000 in child care expenses with untaxed income, but a more recent version of the bill sunsets these savings accounts after five years. President Trump also promised an expansion of this program on the campaign trail.

The bill does not provide any expansion of the Child and Dependent Care Tax Credit (CDCTC), which provides a tax credit to subsidize the cost of child care for families. The tax credit provides up to $1,050 annually for one child and $2,100 for two or more children. In reality, most families receive much less than the maximum amount. These levels are well below the $10,000 average annual cost of a child care center and exclude millions of children in families living paycheck to paycheck who earn too little to qualify. Expanding the credit or making it refundable would address these shortcomings, but the CDCTC is left unchanged under the House GOP tax plan. Meanwhile, the bill would send $1 trillion in tax cuts to businesses and corporations, and the wealthiest 1 percent of Americans would reap nearly half of the tax benefits by 2027.

What the bill does do is provide a small expansion of the Child Tax Credit (CTC) from $1,000 per child to $1,600. However, this additional $600 is nonrefundable and, thus, not accessible to children in households with very low earnings. The $1,000 credit is indexed to inflation, so the lowest-income families would receive a comparatively smaller increase in their Child Tax Credit. This modest increase for families with children does not come close to offsetting the tax breaks for the wealthy and corporations that are part of this bill.

The legislation’s failure to improve child care affordability is just one example of how it fails to address Americans’ caregiving needs. The legislation also fails to address Americans’ other caregiving responsibilities, such as caring for elderly parents, loved ones with disabilities, and veterans, amongst others. It also eliminates an adoption tax credit that helps parents defray the costs associated with adopting a child.

Making child care more affordable for working families is a laudable and bipartisan goal. This legislation, however, will not help more families afford child care. In the long term, the bill will actually raise taxes for some working families and give corporations and multimillionaires a big payoff. Arguments about the importance of making affordable child care a reality is a bait and switch designed to use a popular issue to sell a tax bill that fails to meaningfully support families living paycheck to paycheck.

Katie Hamm is the vice president for Early Childhood Policy at the Center for American Progress.

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Katie Hamm

Vice President, Early Childhood Policy