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Senator and presidential hopeful Elizabeth Warren (D-MA) wants every family in the United States to have access to high quality, affordable child care for their children, from birth to their first day of school.
My first reaction to Warren’s plan was, “Finally!” What parent wouldn’t want to be able to go to work knowing that their young children are well cared for and better prepared for school? What parent wouldn’t want their maximum child care costs capped at 7 percent of their income as Warren proposes? Or pay nothing at all if they earn less than 200 percent of the federal poverty level (about $51,000 a year for a family of four)?
Warren would fund her $70 billion-a-year Universal Child Care and Early Learning Act with a new tax on wealth. Government would pay providers directly through a newly established national network of local child care and early learning centers and family child care homes. She’d enforce the same quality, safety, and educational standards on these facilities that already apply to military child care and Head Start.
But is Warren offering parents what they really need… or want? To find out, I asked a couple dozen mothers who have used or currently use child care services. In my nonrandom sample, about 80 percent live in two-parent households and the same share have annual household incomes far exceeding 200 percent of the federal poverty level.
I asked them to choose between: (1) universal, means-tested child care through a federally-subsidized facility or (2) a tax credit or tax subsidy that would provide cash to purchase child care of a parent’s choice.
The response was perhaps not what Warren hoped for. Of twenty women who responded, only one opted for child care payments made directly to providers.
Warren’s proposal isn’t incredibly detailed, but its new national network of care providers does not appear to include in-home child care provided by relatives or nannies. That could be because over the past 20 years, licensed child care centers increasingly provided most federally subsidized services funded through the Child Care and Development Block Grant (CCDBG), according to an October 2018 Urban Institute report by Julia Henly of the University of Chicago and the Urban Institute’s Gina Adams. After all, it’s easier to regulate, monitor, and improve the quality of care provided by licensed centers, rather than family, friends, or neighbors.
But the Henly and Adams report suggests Warren's model has shortcomings. Warren would maintain, but not expand, existing CCDBG subsidies to providers who don't work in centers or family child care homes. That may not be sufficient for the children who make up the majority of low-income children under age 6 with working parents: children who “need care during nontraditional and variable hours, infants and toddlers, children in rural areas, and children with disabilities and special needs.”
Warren’s design may not even help my middle-income and upper middle-income survey respondents. Many have jobs that require evening hours or travel that child care centers or family child care homes can’t accommodate. These parents have relied on nannies, grandmothers, or other relatives who would be ineligible for Warren’s subsidies.
Don’t misunderstand, my respondents would love financial help with child care. Some have dropped out of the workforce to raise their children, in part because child care is so expensive. Says one friend, “I feel like I’m paying more than college tuition to have our two pre-schoolers in child care right now. It’s crazy.” She’s wrong but not by much. Here in Michigan, child care for two children—say an infant and a 4-year-old—costs on average $16,646 a year. The average annual in-state college tuition is $11,295 per student.
But tax credits are the preferred choice for most of my friends.
And they already exist. For example, the Child and Dependent Care Credit (CDCC) helps pay for care expenses including child care tuition or wages for nannies, neighbors, or in some cases relatives, for children under age 13. My family, for example, has received a modest CDCC for a share of summer camp tuition of up to $6,000. The tax credit rate depends on a taxpayer's earned income (and is somewhat smaller for higher-income taxpayers).
In addition, the 2017 Tax Cuts and Jobs Act greatly expanded the separate Child Tax Credit through 2025, doubling the maximum amount to $2,000, and making it available, at least in part, to households with annual incomes up to $200,000 for single filers and $400,000 for joint filers.
Both tax credits provide a modest amount of money. But it’s something.
There’s also the Earned Income Tax Credit available to lower-income working families (a family of four could earn no more than $51,492 annually). As TPC’s Elaine Maag told me, “Although the credit typically comes at one point in the year (tax time), parents can use the money however they deem it best. And research supports that the EITC is associated with a host of benefits for children including better health outcomes, more schooling, and higher earnings in adulthood.”
Would it be worth expanding these three tax credits and the current child care subsidies already available through the CCDBG? Perhaps that’s a better alternative than Warren’s proposal, if only because it might be what parents—across the income spectrum—really need, and want.
The Tax Hound, publishing once a month, helps make sense of tax policy for those outside the tax world by connecting tax issues to everyday concerns. Have a question or an idea? Send Renu an email.
Posts and comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.
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