From The Washington Post:
In a speech on economic policy in Detroit Monday, Donald Trump put forward a new idea for helping American families pay for child care: Allow taxpayers to deduct child-care expenses from their incomes. Under Trump’s proposal, families with children would save money when paying their taxes, and the government would essentially pay part of the cost of looking after their kids.
Experts on child care are skeptical, though. The cost of the plan for the government could be exorbitant, and it is not clear how the policy would help poor and middle-class families. More affluent families would likely save the most money under the plan.
“I’m most concerned about a single mother who doesn’t earn a lot of money and who has a couple of kids at home,” said Michael Strain, an economist at the conservative American Enterprise Institute. “The benefits of this policy will not accrue to the people who most need help.”
Trump offered few other details about his plan. In general, though, deductions such as the one proposed by Trump overwhelmingly benefit wealthy families. For example, the wealthiest fifth of households claims 73 percent of the savings from the deduction for mortgage interest and 84 percent of the savings from the charitable deduction, according to the Congressional Budget Office.
There are a few reasons that these deductions primarily benefit wealthy families. First, many working-class households do not pay any federal taxes on their income. Second, even those that do pay income taxes generally opt to take the standard deduction from their income, rather than itemizing expenses like child care. From the few words that Trump offered in his speech, it was not clear whether his plan would provide additional benefits for these households beyond the current standard deduction.
For example, just 6 percent of households with less than $20,000 in income itemized their deductions, according to the Congressional Research Service. Among those with between $20,000 and $50,000, 22 percent itemized. By contrast, 84 percent of those with between $100,000 …