Could Tax Reform Under President Trump Actually Help Working Moms?

Throughout history, lawmakers have used the Internal Revenue Code to provide relief to working families facing economic hardships. In the 1980s, for example, Ronald Reagan called his proposed expansion of the Earned Income Tax Credit “the best anti-poverty, the best pro-family, and the best job creation measure to come out of Congress.” Through the tax code, lawmakers incentivize certain behaviors—like home buying—by allowing taxpayers to deduct certain expenses from taxable income—through a mortgage interest deduction, for example—or by creating tax credits, which function as dollar-for-dollar reductions in the amount of tax owed.

While the IRS allows taxpayers to deduct all “ordinary and necessary” business expenses, caregiving costs are not currently eligible for this deduction. Today’s rule comes from a 1939 case, Smith v. Commissioner, (which has not been revisited in the intervening 80 years) in which the court—despite sardonically acknowledging “[w]e are told that the working wife is a new phenomenon”—reasoned that a business deduction for childcare would be inappropriate given the wife’s role “as custodian of the home and protector of its children.”

Instead, Congress came up with the “Dependent Care Tax Credit” (DCTC), which provides a tax credit for caregiving expenses incurred “to enable the taxpayer to be gainfully employed.” Unfortunately, however, the DCTC does little to help most working families due to its complex formula and its non-refundable nature.

Take the example of a married couple with one child, in which each spouse earns $20,000 per year: this family is eligible to benefit from a credit of $675—just a fraction of the average annual cost of care for one child, which is approximately $10,000. (A business deduction, by contrast, would give them approximately double the benefit, at $1,500).

Alternatively, consider a different married couple with one child, in which one spouse earns $100,000 per year, while the other earns $35,000 per year: even though they earn almost $100,000 more per year than the first family, they are eligible for a nearly equal credit of $600 from the DCTC.

Paradoxically, the situation is even worse for a single parent with one child who earns $20,000 per year: she will gain only $275 from the DCTC. This is because she only owes the federal government $275 in taxes, after factoring other credits and deductions, along with her “head of household” filing status. If the DCTC were a refundable credit—like the earned income tax credit championed by Reagan—she would receive an additional $700 in the form of a government check.

Ivanka’s childcare proposal addresses many of these problems by creating a new tax deduction for caregiving expenses, along with tax-free flexible spending accounts with matching contributions for low-income families. Perhaps most remarkably, her plan also requires employers to provide six weeks of paid maternity leave; a change that would end the United States’ embarrassing distinction as the only developed country in the world that currently fails to provide such a guarantee to its workers.

As with most tax reform proposals, the plan has both benefits and drawbacks. One positive feature is that, unlike most deductions (including those for business expenses), taxpayers who otherwise would prefer to use the standard deduction can still deduct childcare expenses. This is particularly important for lower-income families, the majority of which benefit from the standard deduction.

The proposed deduction also replaces the DCTC’s arbitrary fixed dollar limits with caps equal to the average annual cost of childcare in the taxpayer’s state, which range from roughly $4,000 in Mississippi to $17,000 in Washington, D.C. Tying the value of the subsidy to the average cost in the state’s market is a feature that proponents of the current Affordable Care Act tax credit lauded as crucial for low-income workers in the context of the recent healthcare debate.

A major drawback of Trump’s plan is that it overwhelmingly benefits wealthier families over lower-income ones; the Tax Policy Center concluded that 70 percent of the plan’s benefits would go to families earning $100,000 or more. Moreover, the paid maternity leave proposal appears to apply only to mothers, and not to fathers—a feature that Hillary Clinton’s campaign policy adviser Maya Harris rightly condemned as coming from “a ‘Mad Men’ era” in which “only women are taking care of infants.” The suggested six-week leave period also falls well below those provided by other western countries, and is still two weeks short of the recommended leave period for the 20 percent of mothers who give birth by C-section every year.

Though it is clear that Ivanka is driving the proposal, another issue is that the reform would be credited to an unabashedly misogynistic president, one who has called breastfeeding “disgusting” and bragged about never having changed a diaper. Trump’s views on working women are perhaps best exemplified by comments he made in an interview with ABC News in 1994, in which he began with the caveat, “I don’t want to sound too much like a chauvinist,” and went on to complain, “when I come home and dinner’s not ready, I go through the roof,” concluding that, “putting a wife to work is a very dangerous thing.”

A few weeks ago, Bloomberg reported that Ivanka met with lawmakers on Capitol Hill in February to ask them to incorporate her childcare plan into the broader tax reform effort. If she is successful, this will leave the millions of women who marched in protest of Trump’s inauguration in January with a painful choice: do we forego the opportunity to solve a childcare crisis that is, as Anne-Marie Slaughter puts it, “the taproot” that “gives rise to distortion and discrimination” against women across America? Or do we advocate for a desperately needed reform, knowing that its success would embolden and perhaps legitimize a reckless and sexist President?

Those in a position to influence the tax reform debate in Washington owe it to the millions of struggling working mothers to fairly (and rigorously, given the administration’s fondness for “alternative facts”) evaluate any such proposal on its merits. If we believe that the policy—viewed in conjunction with other proposed changes to the tax code—will ultimately provide necessary relief to working mothers, we should find a way to advocate for its success while making clear that Donald Trump is still no champion of working women. As Hillary Clinton said in her now famous 1995 speech in Beijing to the U.N. Conference of Women—just one year after Trump’s deplorable ABC News interview—now is a time when “we must move beyond rhetoric” and focus on advocating for the “women everywhere who simply don’t have time to do everything they are called upon to do each and every day.”

Ally Coll Steele is a graduate of Harvard Law School, and a former Democratic Hill staffer in both the House and the Senate. She worked on the Clinton campaign in the legal department during the 2016 election.