Massachusetts readers, please note that Early Education Advocacy Day at the State House has been rescheduled to April 24th, 2017, 10:30 a.m.
What’s the best way to pay for child care? Here at Strategies for Children, we’re always looking at different approaches. As we’ve blogged, Finland uses tax revenues. And other European countries provide targeted subsidies to low-income families.
What about the United States?
Grover J. “Russ” Whitehurst has an outside-the-box idea for a modernized education savings account. Whitehurst is a senior fellow at the Brookings Institution, a Washington, D.C., think tank.
The proposal: Invest $42 billion to “provide a substantial subsidy for every child from birth to fifth birthday in a family at or below 200 percent of the federal poverty level. This is nearly half the families in the U.S,” Whitehurst writes in “Why the federal government should subsidize childcare and how to pay for it.”
To finance this plan, Whitehurst calls for using the $26 billion that the country already spends on child care and adding another $16 billion that would come from revamping the country’s charitable donations tax deduction.
Specifically, Whitehurst says, “The charitable deduction presently costs the Treasury $55 billion a year. A $16 billion offset for childcare would leave $39 billion on the table to continue the charitable deduction or to support various tax reform proposals.”
Whitehurst’s reasoning for supporting child care: “Most families need childcare. Childcare is expensive and licensed center-based care is unaffordable for families of poor to modest means. There is broad public support for more government spending on childcare as long as that spending does not worsen the deficit.”
How could this plan be executed?
“There are several ways that a federal subsidy for childcare might be accomplished. Three broad categories are: tax credits, grants to states, and savings accounts,” Whitehurst says.
The third option could be “a federal Childcare and Education Savings Account.” The government would put money into the accounts of eligible children, and parents would “pay their childcare providers through a transaction that debits that account.”
Half of any unused funding “would remain in the account for expenditure on the care or education of that child until the child is an adult, e.g., leftover funds in the account could be expended on college tuition.”
Whitehurst contrasts his plan to President Trump’s call for child care tax credits, noting:
“Tax credits as preferred in the Trump plan have a serious disadvantage compared to education savings accounts in that they provide once-a-year rebates whereas the bills for childcare are due and payable throughout the year. In contrast, funds in an education savings account would be deposited and available for expenditure soon after a child is born, topped up every birthday thereafter during the preschool period, and available for expenditure on that child’s education needs through college and career training.”
Could Whitehurst’s plan work? That remains to be seen. But his model does help expand the options that should be considered in the public debate on how the country can best provide high-quality care for its children.