Federal Lawmaker Starts Work on Trump Childcare Tax Incentive Plan

Published January 24, 2017

A federal lawmaker announced plans to collaborate with the president’s daughter to use federal tax policy to encourage parents to return to work and place their children in daycare centers.

In January, U.S. Rep. Marsha Blackburn (R-TN) announced she would be working with Ivanka Trump, a businesswoman and daughter of President Donald Trump, to implement legislative proposals announced in September 2016 to reduce the cost of out-of-home child care.

On CNN’s State of the Nation news show, Blackburn told host Jake Tapper she was “delighted to see that we’re looking at options for tax credits, tax incentives, ways for moms and dads to be able to write off this child-care cost.”

No specific proposals have been released, but Trump told reporters during the 2016 election campaign he wanted to create new income tax deductions and other tax incentives to ease families’ childcare expenses.

In 2016, Trump also proposed new federal regulations mandating employers provide paid maternity leave for all new mothers, a policy he credited Ivanka Trump for proposing.

Predicts Mixed Results

Andrew Baxter, an M.A. Fellow with the Mercatus Center at George Mason University, says using government tax policy to influence the cost of private services has not worked well in other sectors of the economy.

“Elements of the proposal include above-the-line tax deductions on child care expenses, cash subsidies for low-income earners, the creation of more generous tax-free dependent care savings accounts, and the provision of six weeks of paid maternity leave for mothers through unemployment insurance,” Baxter said. “While it’s likely that subsidies and tax breaks will enable caregivers to spend more on dependent care, the aggregate effect is less clear, as these solutions have been implemented in both higher education and health care, to mixed effect.”

‘Promising’ Regulatory Reforms

Baxter said reducing unnecessary regulations lowers costs for consumers.

“The portions of Trump’s plan that commit to reforming regulations that increase the cost of dependent care are promising, because they address the root of the problem,” Baxter said. “If done correctly, research has shown that targeting less-cost-efficient regulations, such as group size limits and child-staff ratios, will lower the cost of dependent care, allowing more mothers to stay in the workforce without lowering the quality of care.”

A Question of Supply

Aparna Mathur, a resident scholar for economic policy at the American Enterprise Institute, says a shortage of child care centers is driving costs up.

“What [Trump] talks about is essentially a federal tax credit,” Mathur said. “At the state level, the real problem that we will find is usually the lack of availability of good, quality day care. Even if the families have access to these monies coming in from credits and grants, they really don’t have access to this good quality daycare. Whatever investments states can make should be in terms of improving the availability and the affordability of these daycare centers, but it really comes down to the scarcity of daycares.”