February 26, 1998 | Commentary on Welfare and Welfare Spending

Paid Day Care vs. Parental Day Care

President Clinton wants to give tax breaks to working couples who use paid day care for their children. This is great for the day-care industry and the government bureaucracy that regulates it-both will get bigger as a result. But it's lousy for couples who make financial sacrifices so one parent can stay at home with their children.

Here's what parents who stay home with their children will get under the president's plan: nothing. In fact, these parents will help pay for the expanded day-care benefits going to the typically more affluent parents who use paid day care. Such a discriminatory plan has no place in public policy.

This is not to say that middle-class parents aren't hurting. They are. Decades of tax-and-spend government policies have driven tax rates so high that many families struggle to make ends meet. But in its rush to help, Washington should give tax relief to all working families with young children-not just the minority that use paid day care.

During the post-World War II baby boom, when most of today's parents were born, the federal government deliberately kept taxes low on families with children. In 1948, the typical family of four paid about 3 percent of its income in taxes to the federal government. Today that same family pays 25 percent. Factor in state, local and indirect taxes and the total bite rises to 38 percent. In many two-earner families, the mother- whether she realizes it or not-is working not to raise her family's standard of living, but to pay for 50 years of runaway government spending.

Speaking of government spending, no Clinton administration proposal would be complete without it. The day-care plan is no exception. In addition to tax breaks for paid day care, the president wants to spend billions on programs such as the Child Care and Child Development Block Grant and Head Start. In fact, two-thirds of the president's $20 billion plan is for new spending for welfare mothers and low-income working families, not tax reduction. Unfortunately, this is usually how Clinton administration proposals work: you throw the middle class a bone-in this case a tax break on paid day care-to deflect attention from the real goal of higher welfare spending.

The danger is that with the era of budget surpluses upon us, members of Congress won't know how to say no to these initiatives. But they should try. Not only should they reject the new spending, they should insist that tax relief not discriminate against families who give up tens of thousands of dollars in income so one parent can remain home and raise the kids.

To its credit, Congress recently took a small step toward rolling back punitive taxation of families by enacting a tax credit for children under the age of 18. The credit will be worth $400 per child in 1998 and $500 in each subsequent year. A good start, to be sure, but Congress should build on this foundation by providing additional tax relief to working families with children.

It could do this in a number of ways. For example, Congress could raise the current $500-per-child credit to $1,000 for each child under the age of six. Or it could do what Sen. John Chafee of Rhode Island recently proposed and extend the dependent care tax credit-which is currently available only to families who use paid child care-to all taxpaying families with preschool children.

Either of these measures would be better than the president's proposal, which may prove politically popular but fails to serve the real interests of children.

About the Author

Edwin J. Feulner, Ph.D. Founder, Chairman of the Asian Studies Center, and Chung Ju-yung Fellow
Founder's Office