How hard it is these days for Republicans to propose policies—even ones that are rather liberal—that don’t get dismissed as favoring the wealthy? Consider the maternity leave and child care policies officially put forward by Donald Trump this week: The proposals are progressive enough that they could well have come from the Clinton campaign, but they have been denounced as goodies for the haves at the expense of the have-nots.
Here’s how NPR’s Danielle Kurtzleben put it: “Now, when he first proposed this last month, he was really criticized because this plan seemed like it would really help rich families a lot more than poor families.”
How so? The plan, for example, puts forward a tax deduction that anyone with dependent children can claim, ostensibly to offset the cost of child care. How is it that something so simple and across-the-board favors the wealthy? Kurtzleben has a revealing answer: “After all, a lot of low-income families in the U.S. don’t pay any income tax, and therefore…a deduction really wouldn’t help them.”
This is where we’ve come with our tax system. Forty-four percent of the population pays no federal income tax at all (although a majority of those who don’t pay federal income tax do pay Social Security and Medicare payroll taxes). Because the poor are so favored, any effort to reduce income taxes is scoffed at as being solely for the benefit of the well-to-do.
Politicians (conservatives among them) try to solve this problem by turning tax cuts into refundable tax credits. That way everyone gets a benefit: If you don’t pay any federal taxes, you get a cash payment equal to all or part of what you would have been able to deduct if you had a tax liability. Such credits abound, but the most prominent is the Earned Income Tax Credit. Instituted in 1975, the EITC, as The Encyclopedia of Taxation & Tax Policy puts it, “has grown to be one of the principal antipoverty programs in the federal budget.” According to the Tax Policy Center, “about 9 percent of households have their payroll tax fully (or more than fully) offset” by refundable credits.
Trump has given his child care policy an EITC-style twist, proposing a tax rebate up to $1,200 for those who don’t have any taxes they would otherwise have to pay.
But of course, even a cash benefit masquerading as tax relief isn’t enough to satisfy: “Now, let’s put that into perspective,” Kurtzleben told NPR’s “All Things Considered” host Kelly McEvers: “$1,200. I mean if you pay for child care, you know that that isn’t a…whole lot.” Kurtzleben suggested that daycare in some cities is so expensive that a proper tax credit would be more like $20,000, “or even more.”
Conservatives need to figure out how to defend actual tax cuts from being morphed into refundable tax credits. Either that or their default policy prescription—reducing taxes—will merely become coopted as an all-purpose cover for new transfer payments.
