In Focus: Child Care Subsidies

Apr 26, 2017  |  PERMALINK »

Child Care Tax Plan Misses the Mark for Americans Who Struggle the Most

By Hannah Matthews

Following widespread criticism that its benefits were weighted toward the very wealthy, the Trump Administration appears to be pivoting from an earlier child care tax deduction proposal to one based on tax credits. This proposal is couched within a blueprint for tax reform that would give enormous tax cuts to wealthy Americans and corporations. But a modest step towards addressing child care affordability for some families cannot compensate for the Administration’s overall tax and budget proposals that put low-income families at grave risk of economic insecurity and hardship.

The new child care proposal is reported to expand the value of the Child and Dependent Care Tax Credit (DCTC) and potentially make it refundable so more low-income families could benefit. The DCTC allows parents to claim a tax credit for a portion of their child or dependent care expenses. Details of the plan are not yet available, along with other components of the proposal. A plan to improve the DCTC would be markedly better than the prior tax deduction proposal; yet, this proposal on its own would likely leave millions of low-income working families still struggling to pay the high costs of child care. 

While the DCTC should be improved to broaden its reach and increase its benefit, such improvements must be coupled with an expansion of the federal Child Care and Development Block Grant (CCDBG) to help those who struggle the most. CCDBG provides direct assistance to low-income families to pay child care costs up front and also provides funds to states to improve the quality of available child care. Direct assistance is vital for families to afford the upfront weekly or monthly costs of child care. Yet, due to insufficient investments, CCDBG assistance reaches fewer than one in six children eligible for help.

Setting aside the child care proposal, Trump’s overall tax reform plan would reduce revenues to fund critical government programs—including child care assistance and other important supports that low- and moderate- income families rely on to make ends meet. Additionally, last month’s budget outline by President Trump proposed an 18 percent cut to the U.S. Department of Health and Human Services budget, which would hamper necessary investments in CCDBG, Head Start, and other programs that struggling families rely on to give their children a strong start in life. Trump’s budget proposal would also eliminate the 21st Century Community Learning Centers program that provides critical summer, before-school, and after-school child care for low-income children and youth.

The Trump child care plan may be transforming, but the President’s overall vision for America has not. His tax and budget proposals provide significant advantages to the wealthy and would leave millions of low-income Americans in jeopardy, threatening their children’s well-being and their families’ economic security. 


Apr 11, 2017  |  PERMALINK »

217,000 Children at Risk of Losing CCDBG-Funded Child Care

A new CLASP factsheet projects that up to 217,000 children could lose child care assistance in 2018 if funding for CCDBG is not increased. The Child Care and Development Block Grant (CCDBG), the primary source of federal funding for child care subsidies for low-income working families, supports children’s development while strengthening their families’ economic security.

Currently, CCDBG participation is at an all-time low, with the number of children receiving CCDBG-funded child care on the decline for five straight years. At current investment levels, only about 15 percent of children who are eligible receive child care assistance.

An increase of $1.4 billion is needed in FY2018 to fully fund the bipartisan 2014 CCDBG reauthorization without further reducing the number of children served. The reauthorization included new provisions, such as training, professional development, and comprehensive background checks for child care providers. These important provisions require significant investment in CCDBG. Without these new investments  up to 217,000 children could lose child care assistance in 2018. Congress should prioritize investments critical to low-income people, including CCDBG and other vital programs. 

Read the factsheet >>

Mar 1, 2017  |  PERMALINK »

President Trump Wants to Help Working Families, But Which Families?

By Hannah Matthews and Liz Ben-Ishai

The United States is long overdue in embracing policies that would make it easier for working families to both do their jobs and care for their families. In his first speech to Congress, President Trump expressed his desire to make child care affordable and ensure new parents have access to paid family leave. Unfortunately, his campaign promises and proposals to-date do little to advance public policy in these areas and run counter to getting help to those who need it the most.

In the United States, just 14 percent of civilian workers have access to paid family leave to care for a new child or seriously ill family member—and only four percent of the lowest-income workers have access. While a growing number of states (now five) have passed paid family leave laws, workers in most of the country are often forced to choose between caring for their families and their economic security. Moreover, only about 60 percent of workers are eligible for unpaid, job-protected leave under the Family and Medical Leave Act (FMLA), the only federal leave law. But of those parents who are eligible for FMLA, fewer than 40 percent can afford to go without pay while taking leave. In addition, just 38 percent of workers have access to medical leave to address their own serious health issues.

Parents everywhere struggle to pay the high costs of child care but none more than the lowest-income earners. On average, low-income parents who pay for child care spend 30 percent of their household budget on child care expenses, compared to just 7 percent for higher-income families. The vast majority of low-income families—85 percent—who could qualify for federal child care assistance to help with the staggering costs of care get no help because state and federal governments have failed to invest sufficiently in the Child Care and Development Block Grant (CCDBG), our country’s primary child care assistance program. 

Trump’s plan would do little to address our policy failures for working families. In his address last night, Trump professed a desire to provide paid family leave for new parents. During his campaign, Trump proposed a plan that would offer too few weeks of leave and provide too little wage replacement to make the program viable for low-income families. It also left out other important caregiving and health needs of today’s working families; millions of workers need to be able to care for seriously ill family members (not just new babies) and recover from their own illnesses without risking their economic security. Trump also proposed a financing mechanism—relying on dollars from fraud in the unemployment insurance system—which would not only be insufficient to support the (already inadequate) proposal, but also raise numerous challenges for implementation.

Instead of this poorly designed approach, the president should support the recently introduced Family and Medical Insurance Leave (FAMILY) Act, a federal bill that proposes an inclusive policy modelled on successful state programs. It would enable workers to take up to 12 weeks of paid leave to bond with a new child, care for a seriously ill family member, or recover from their own serious illness. The program would be funded with small contributions from employers and employees, using a social insurance model that is particularly appealing to small businesses.

Trump’s child care proposal is no less flawed. His plan—the bulk of which is a tax deduction proposal for child care expenses—is inherently regressive with the largest benefits going to wealthy families. (This is within the context of a tax reform agenda that would even further advantage the wealthy and corporations and reduce government revenue for funding critical programs and services.) Because most low-income parents do not earn enough to have federal tax liability, they would not benefit at all from this part of the plan. The proposal includes other tax savings mechanisms that also advantage the wealthy and are virtually unusable for low-income families. To address the child care needs of low-income families, Trump’s plan offers a child care “rebate” for low-income families. The rebate would cover just a small share of child care expenses, less than 8 percent, and the size of the benefit would pale in comparison to what higher-income families would receive from other components of the proposal. Moreover, a rebate will not help low-income families pay unaffordable child care bills upfront.

Trump’s plan falls far short of addressing the critical problems of child care affordability and quality.  Families need help affording child care. But paying for child care is only part of the problem. Tax strategies will do nothing to advance quality improvements necessary to ensure that children have access to enriching settings. Central to quality is the child care workforce, who despite the high costs of care, earn very low wages. The best way to help low- and moderate-income families and improve child care quality for all children is investing in CCDBG, which provides direct assistance to help families afford the high cost of child care. CCDBG also builds the quality of child care by providing funds to states for quality improvement activities, including monitoring compliance with critical health and safety standards, and for the training and professional development of child care and early childhood educators.

Investing in affordable child care and paid family and medical leave should be a national priority. Together, these critical supports for working families add up to a strategy that is good for children, families, employers, and our economy. Congress and the President should acknowledge the real challenges of working families and find solutions that help those most in need—and who have the most to gain.

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