Clinton and Trump – Child Care and Maternity Leave.
Presidential candidates Clinton and Trump now each have child-care and maternity leave proposals. Trump has just unveiled his proposal while the specifics of the Clinton plan have been out there throughout the primaries. The differences are quite large and highly instructive about the two candidates.
Maternity benefits are to cover a family’s lost earnings after childbirth while the mother and/or sometimes the father takes care of the newborn child. The federal Family and Medical Leave Act allows parents’ 12 weeks of unpaid leave after a child is born.
In California, Paid Family Leave is available for six weeks after child-birth. The benefits are 55% of wages up to a cap. Paid Family Leave is financed through the State Disability Insurance Tax (SDI) that is paid by most but not all employees. If you have not paid in through SDI, you are not eligible.
The Clinton proposal is for 12 weeks of paid family leave at 2/3rds of the worker’s salary up to a cap. It would be paid for as part of her overall tax proposal for an increase in taxes on the highest income Americans.
The Trump proposal is for 6 weeks of paid family leave at the same level as Unemployment Insurance (UI) benefits. It is financed by reducing fraud in the UI program; in other words there is no financing. His proposal is only for women; whereas her proposal would allow either spouse to be the care-taker for the new born.
Neither candidate proposes that employers and employees jointly pay for the cost, which would be my preferred financing model.
Child-care is essential for working families at least until their children reach pre-school and kindergarten. Existing federal and state policies include a limited child care tax credit and limited federal and/or state subsidized child care typically through licensed child care centers.
The Clinton proposal would add a tax credit to pay for the costs of child-care in excess of 10% of family income and offer a universal pre-school option for every 4 year old in America. It would be paid for as part of her tax proposal for an increase in taxes on the highest income Americans.
The Trump proposal is to add a tax deduction for child-care costs for families with annual incomes up to $250,000 and a child care savings account. It would be available for child care costs until the teenage years and in virtually any setting. It would be paid for by economic growth generated by his tax cuts for the wealthy. In other words, it is not financed.
It is critical to understand the differences between a tax credit and a tax deduction. Deductions are more valuable the higher your tax bracket, so the biggest beneficiaries of the Trump proposal are higher income Americans. Tax credits linked to a percent of income spent on child-care, as proposed by Clinton, are particularly beneficial to moderate and middle income working families.
Prepared by: Lucien Wulsin
Date: September 14, 2016