Comparing the Clinton and Trump Parental Leave and Childcare Proposals

by Taylor English Duma LLP
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Presidential Candidates Hillary Clinton and Donald Trump have each put forward plans for paid parental leave and assistance with the cost of childcare. However, as expected the plans differ significantly. The Clinton Plan is broader, more progressive, and more reliant upon government-administered programs. The Trump approach would provide a mixture of unemployment, tax and employer benefits allowing parents to individually manage the cost of childcare. The 10-year cost of the competing plans is each estimated to be in excess of $500 billion. The Clinton Campaign states that cost of her plan would be fully funded by her proposed tax increases on wealthy taxpayers. However, the non-partisan, non-profit Committee for a Responsible Federal Budget (CRFB) estimates that all of Clinton’s spending proposals are $200 billion short of being covered by her proposed tax increases. The Trump Campaign states that the cost of his parental leave policy would paid for by “eliminating fraud in the unemployment insurance program” and that the cost of his childcare proposals would be “more than offset” by resulting economic growth. CFRB estimates that overall Trump’s policy proposals would increase the federal deficit by $5.3 trillion.

Following are detailed summaries of the Clinton and Trump Parental Leave and Childcare proposals. 

Parental Leave

Clinton. The Clinton Plan would provide 12 weeks of paid leave to working mothers and fathers. It would guarantee at least two-thirds of their income, although the amount would be capped. Clinton states that she would fund her paid leave plan with tax reforms that will “ensure the wealthiest Americans pay their fair share.”

Trump. The Trump Plan would provide six weeks of paid maternity leave by amending the existing unemployment insurance (UI) that companies are required to carry. The benefit would apply only when employers do not offer paid maternity leave, and would be paid for by offsetting reductions in the program so that taxes are not raised. Trump states this would “triple the average two weeks of paid leave received by new mothers.” New mothers would be paid the same amount as unemployment benefits, which range from state to state but according to Trump average about $300 per week. The Trump plan would not apply to fathers but would be available to married same-sex couples if their marriage is recognized under state law.

Childcare

Clinton. The Clinton Plan would cap child-care costs at 10 percent of a family’s income through a tax credit mechanism. However, details have not been provided by the Clinton Campaign as to how that tax credit mechanism would work.

The Clinton Plan would also significantly increase government funding of childcare programs. It would make preschool universal for four-year-olds, provide funding to states and local communities that work to increase the compensation of childcare providers and early educators, and provide equity with kindergarten teachers by investing in educational opportunities, career ladders and professional salaries.

The Clinton Plan would double the government’s investment in the Early Head Start-Child Care Partnership program, which provides a curriculum into the child care setting to low-income families. The Clinton Plan would also expand access to evidence-based home visiting programs such as the Maternal, Infant and Early Childhood Home Visiting (MIECHV) program, which provide home visits by a social worker or nurse during and directly after pregnancy.

Finally, the Clinton Plan would award scholarships of up to $1,500 per year to help student parents afford high-quality childcare and it would increase access to childcare on college campuses by funding campus-based childcare centers.

Trump. The approach of the Trump Plan is to offer tax subsidies to provide families the “power and information to choose who will be providing care and where that care will be provided without fear of loss of government benefits.”

The tax subsidies would start with an above-the-line tax deduction for children under age 13 that would be capped at the state average cost for the age of the child. The exclusion would not be available to taxpayers with a total income more than $500,000 for married joint filers or $250,000 for single filers. The childcare exclusion would be provided to families who use stay-at-home parents or grandparents as well as those who use paid caregivers, and would be limited to four children per taxpayer.

The Trump Plan would also offer spending rebates for childcare expenses to certain low-income taxpayers through the Earned Income Tax Credit (EITC). The rebate would be equal to 7.65 percent of remaining eligible childcare expenses, subject to a cap of half of the payroll taxes paid by the taxpayer (based on the lower-earning parent in a two-earner household). This rebate would be available to married joint filers earning $62,400 ($31,200 for single taxpayers) or less. Limitations on costs eligible for exclusion and the number of beneficiaries would be the same as for the basic exclusion. The ceiling would increase with inflation each year.

Under the Trump Plan, all taxpayers would be able to establish Dependent Care Savings Accounts (DCSAs) for the benefit of specific individuals, including unborn children. Total annual contributions to a DCSA would be limited to $2,000 per year from all sources, which include the account owner (parent in the case of a minor), immediate family members of the account owner and the employer of the account owner. The Trump Plan states that annual contributions to a dependent care savings account and earnings on the account “will not be subject to tax”  presumably meaning that annual contributions will be tax deductible. Any funds remaining in the account when the child reaches 18 years old would be available for the payment of education expenses.

To encourage low-income families to establish DCSAs for their children, the Trump Plan would provide a 50 percent match on parental contributions of up to $1,000 per year. When parents fill out their taxes they can check a box to directly deposit any portion of their EITC into their Dependent Care Savings Account. All deposits and earnings thereon will be free from taxation, and unused balances can rollover from year to year.

The Trump Plan would also provide incentives for employers to help their employees with child care. It would increase the annual cap for the business tax credit for on-site childcare to $500,000 per year (up from $150,000) and the recapture period would be reduced to five years (down from 10 years).

Also, businesses that pay a portion of an employee’s childcare expenses would be able to exclude those contributions from income. Employees who are recipients of direct employer subsidies would not be able to exclude those costs from the individual income tax and the costs of direct subsidies to employees could not be used as a cost eligible for the credit.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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