The most newsworthy part of Donald Trump’s economic speech earlier this week, at least in the policy world, was his proposal to help American families by making the cost of child care tax deductible up to a certain amount.
There are upsides and downsides to his proposal, as Carrie Lukas noted on the Corner, and he certainly deserves credit for taking it on. It is remarkable how vulnerable Democrats can be on such topics if Republicans are simply willing to engage and offer up their own ideas.
Provided they are well thought-through, that is, and Trump’s proposal does not seem to be: His idea is a good ways away from how conservatives should be thinking about the issue. Here’s a few reasons why, and some pointers toward how to think about the issue better:
- The child-care deduction helps rich parents much more than poor parents. That’s just how deductions work (they are worth whatever your marginal tax rate is), and it is true even if the proposal is deductible against payroll taxes, as Carrie says the Trump campaign has suggested. This is a huge problem: The great majority of the policy’s benefits could flow to the wealthy. If you want to subsidize child care, there is no reason not to make it a tax credit, providing the same benefits to all taxpayers (and potentially even phasing it out, so it is not wasted on rich parents at all).
- The deduction helps mothers who work but does nothing for mothers who don’t. This is a pretty straightforward problem too: If we want the tax system to support parents raising children (which we should), whether they’re working or not should be irrelevant. The right way to support them, then, is just by letting them keep more of their own money, as Carrie suggests – via an increased child tax credit. (This is a feature of the plan on which Senator Marco Rubio ran for president — disclosure: I worked for his campaign.)
- We should think hard subsidizing something that may not be good for kids. As Carrie has written, professional daycare may actually be pretty bad for kids, relative to caring for them at home or getting help from family members. So it’s hard to see why we should be encouraging it above any other option. The only reason to do that is to push women to work more than they would otherwise, which some regard as an important economic-policy goal. But . . .
- There are better ways to encourage women to work. The United States lags behind other wealthy countries in the rates at which both men and women work, so it’s not obvious to me why we should encourage women to work more before we do something about why men are working so much less than they used to. But if we assume we do want to do it, economists have found that second earners (typically women) respond very strongly to marginal tax rate changes, so eliminating the marriage penalty, thereby cutting taxes on second earners while marginally encouraging marriage, would be a more direct way to accomplish this. Changing regulations and labor laws to make part-time work easier would help, too.
It’s crucially important that conservatives engage on issues like the cost of raising kids, and it’s even better when they come up with specific ideas to address Americans’ concerns about them. The solutions we propose, though, should hew to conservative principles and reflect what we know about society. As it stands, Trump’s proposal just doesn’t.