Lilian V. Faulhaber, a Boston University law professor, recently a number of ways in which the tax code disadvantages working mothers. She ends with a discussion of the child and dependent care credit, the maximum value of which is $1,050 for one child or $2,100 for two or more, an amount that quickly decreases as income rises to $600 and $1,200 respectively. Faulhaber observes that a household earning $50,000 can only reduce its taxes by $600 or $1,200 under the credit. For context, the median household income for U.S.-born families with children was $59,300 in 2011, and the median household income for immigrant families was $47,000 that same year. (It is interesting, incidentally, to see how the gap between U.S.-born families and immigrant families varies across U.S. states. In most states, as you might expect, median household income for U.S.-born families exceeds that of immigrant families, sometimes by a substantial margin. Yet in Virginia, West Virginia, Vermont, Ohio, New Hampshire, Mississippi, Michigan, Maine, Louisiana, Kentucky, and Hawaii, immigrant families have a higher median household income than U.S.-born families.)

Faulhaber proposes a few different strategies for overhauling the child and dependent care credit:

(1) Decreasing overall tax rates, an approach that won’t necessarily benefit second-earners, a disproportionately large share of whom are working mothers;

(2) addressing the high cost of child care by providing it directly or subsidizing it more generously;

(3) or increasing the child and dependent care credit so that it covers a large share of the total child care costs, or treating child care as a business deduction.

Robert Stein’s solution is quite different: rather than expand the child and dependent care credit, he proposes folding it into a larger child credit by replacing it and the existing dependent exemption for children, the child credit, and the adoption credit with a new $4,000 child credit that can be used to offset both income and payroll taxes. This approach has the potential to be far more progressive than Faulhaber’s proposal, as it reduces payroll tax liability as well as income tax liability, and it doesn’t disfavor families that rely on informal rather than formal child care.