HOW CAN the federal government best help working parents out with child care? The question has gone largely unaddressed by Congress in recent years, even though the status quo, a tax credit for up to a third of child-care costs, contains some obvious gaps. Now, though, a bill to rethink and redirect that subsidy is making its way through Congress. The bill -- which coincides with a broader new awareness on the Hill of child-care-related issues -- does not purport to solve the general problems of finding and providing quality day care, for which the need, and the cost, grows every year. It would, however, remedy an obvious inequity in the way the money now being spent is given out, and as such it deserves serious attention.
The current credit, the only federal day-care subsidy apart from welfare, represents a flawed way of distributing funds: it is available, in some degree, to anyone regardless of income, and it loses its value for families whose income is lowest. Wage earners with a working spouse can subtract up to 30 percent of child-care costs from their tax liability, as long as those costs don't exceed $2,400 per child. This doesn't come to a lot of money, especially compared with the $3,000-a-year day-care costs that prevail in most cities. But the more serious shortcoming of the tax credit is that, like any tax credit, it is useless for families without a tax burden -- and since tax reform, there are more of those families than there were. The effect is a situation in which the main government assistance in this area goes to those who need it least.
The bill by Rep. Nancy Johnson, a Republican from Connecticut, would cap the benefit -- stop offering it altogether to families that make more than $69,500 a year, and phase it out by percentage points between that and $60,000. This maneuver would save about $300 million a year, which the bill would convert to vouchers and distribute to families with income starting at twice the poverty level. Many of these are the families whose transition off welfare has attracted concern. Unlike "transition" benefits, though, and perhaps more attractive in terms of equity and incentive, such vouchers would be equally useful to families that have not been on public assistance but are barely staying off it. A proposed matching program with the states could up the total to $375 million.
Child-care advocates have opposed the Johnson bill, mainly because the voucher money carries no particular restrictions; unlike the funds distributed for child care through welfare, these can go to anyone caring for children, licensed or not. (The same is true of the tax credit, but less visibly.) Regulation of child care is an important concern. But there is no particular reason it cannot be separated from the easier and more straightforward matter of who should get the money the federal government is giving out already. On its own, the notion of rechanneling money away from people who don't need it to people who need it desperately is an eminently sensible one.