Working parents now can use two tax benefits to offset child care costs: the child and dependent care tax credit (CDCTC) and the exclusion for employer-provided child care.
Advertisement
The Daily Beast ran an interesting story this week about Republican presidential nominee Donald Trump and his predilection for the Economic Policy Institute (EPI), an economic think tank and policy shop in Washington, DC. By offering a tax deduction for childcare, Trump is proposing a child care plan that will absolutely miss the working families that need help the most.
Lest we forget: Trump’s prosperity plan also calls for ending initiatives to cut carbon emissions, ignores renewable energy, and fantasizes about global warming being non-existent.
Capping the cost of child care: Under her plan, families would not pay more than 10% of their income in child care costs. She also has proposed increasing options for parents now attending college.
There is no indication that Trump designed his tax plan to benefit his own companies.
She’d provide these benefits through government subsidies and various forms of tax relief that she has yet to detail. A low business tax rate of 15 percent? To counter this, Clinton wants to ensure all workers are offered 12 weeks paid leave with at least two-thirds of a worker’s current wages up to a cap. Because it’s used most frequently by earners at the lower end of the wage scale, a large increase helps low- and middle-income people save on their taxes.
Right now, only 60% of workers are eligible for FMLA unpaid leave because the law doesn’t cover businesses with fewer than 50 employees.
But preschool can be cost prohibitive for lower-income families. Lastly, pre-K education would be offered to all 4-year-olds in the USA over a 10-year phased roll-out process.
His last tax plan, released in September and withdrawn from his website in advance of Monday’s economic-policy speech, would have cost almost $10 trillion over a decade, according to the Urban-Brookings Tax Policy Center.
By enlisting the aid of Moore and Kudlow – both former advisers to President Ronald Reagan – Trump has increasingly embraced so-called supply-side economics, a standard of the 1980s that holds that high tax rates discourage economic growth.
A little-noticed provision in Donald Trump’s tax reform plan has the potential to deliver a large tax cut to companies in the Republican presidential nominee’s vast business empire, experts say. “In 2011, for instance, families with employed mothers whose monthly income was $4,500 or more paid an average of $163 a week for child care, representing 6.7% of their family income”, a 2014 Pew Research Center report noted. Costs vary widely by state.
Trump’s plan would dramatically reduce taxes on what is known in tax circles as “pass-through” entities, which do not pay corporate income taxes, but whose owners are taxed at individual rates on their share of profits. But, he said, so far it’s not clear what the child care deduction would do on a practical level. The reason is simple: deductions, exclusions, and nonrefundable tax credits (such as the CDCTC) don’t benefit people who don’t owe federal income tax.
The standard deduction allows taxpayers to reduce their taxable income without itemizing expenditures such as charitable donations or mortgage-interest payments. -They could claim up to the average cost of child care in their state for their child’s age. On the other hand, if the exclusion of income extended to payroll taxes, it would help low-income families.
Child care advocates are very happy child care issues are getting attention in the campaign. The top corporate rate is now 35 percent, though many businesses take advantage of deductions to pay a much lower effective rate.
Advertisement
Pass-through income is taxed at a lower rate than income from traditional corporations, including publicly traded ones, that are subject to the corporate income tax. He added: “It’s a pretty big tax cut, but it doesn’t result in a significant amount of economic growth”.
