Editor’s Note: Edward J. McCaffery is Robert C. Packard trustee chair in law and a professor of law, economics and political science at the University of Southern California. He is the author of “Fair Not Flat: How to Make the Tax System Better and Simpler.” The opinions expressed in this commentary are solely those of the author.
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Ed McCaffery: Looks like Trump's tax plan would save high-income moms like Ivanka Trump at least $10,000 per year
Because it's a deduction, not a credit, that aspect of plan leaves low income women out, he says
A later add-on to his proposal would save low income women pennies on a dollar, he says
It appears Donald Trump’s all-male team of economic advisers feel for Ivanka Trump’s financial plight.
The child care tax policy as Trump announced it in his economic speech in Detroit yesterday would save upper-income working mothers like Ivanka Trump at least $10,000 per year while not saving the average working mother a penny.
As always with The Donald, details are a bit sketchy. What is clear is that Trump is proposing a deduction, not a credit.
“My plan will also help reduce the cost of child care by allowing parents to fully deduct the average cost of child care spending from their taxes.”
The simple math of income tax deductions is that they save one money at her marginal tax rate.
Ivanka Trump, a successful businesswoman, and her husband, Jared Kushner, a real estate developer and newspaper publisher, would almost certainly fall in her father’s proposed top individual income tax bracket of 33%.
It is not clear what Trump means by “average cost of child care spending” – those devilish details again. But a blog post by Alissa Quart for The New York Times three years ago put child care costs for “middle-class New Yorkers” at up to $30,000 per year.
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If the Kushner-Trumps took a $30,000 child care deduction, at their 33% tax rate, it would save them $10,000. They would have $10,000 more in real cash than without Trump’s tax plan.
Most working mothers, on the other hand, would not pay federal income tax under Trump’s proposal; almost half of American households currently do not. No matter how large their child care costs may be – and no matter how much they struggle to pay them – something (the child care costs) times nothing (the income tax rate) is always nothing.
It is important to note that although most American working households will get no break at all from Trump’s income tax-based plan, they are hit hard by payroll, sales and other often hidden taxes, which will almost certainly continue to increase with Trump’s reckless revenue cuts.
Presumably the Trump campaign became aware after Trump gave his prepared speech of the optics of their child care tax break. The New York Times reported that Trump’s team issued a statement Monday afternoon that added elements to his plan. According to his emailed statement, said the Times, his proposal would also provide “credit to stay-at-home caregivers” and that “to provide benefits to lower-income taxpayers who may not benefit from the deduction, the plan also allows parents to exclude child care expenses from half of their payroll taxes — increasing their paycheck income each week.”
“Stay-at-home caregivers” are not in the workforce, of course; helping them is a salve for the conservative, evangelical base. An exclusion from one-half of payroll taxes, if this even were to work out, would save lower-income working mothers six or seven cents on their child-care dollar, far less than Ivanka’s 33% discount. The modesty of this afterthought for working moms speaks volumes about Trump’s genuine concern for middle-class working parents.
Trump’s child care plan will predominantly help wealthy moms like Ivanka Trump, in their high tax brackets and with high child care costs. In an age of budget deficits, giving such households an extra $10,000 in tax breaks seems like an odd and wasteful luxury.
Just a suggestion, but perhaps The Donald should add a middle-class working mother to his economic team.