Democratic presidential nominee Hillary Clinton responded three days later by highlighting a proposal on the same subject that she had introduced during the Democratic primary: to cap child-care costs at 10 percent of a family’s income through a tax credit.
These competing proposals have generated numerous economic comparisons. The analyses show that each proposal would help a different economic group. Wealthier families would receive more money with Trump’s deduction. The working poor would be helped more by Clinton’s expanded tax credit.
Why would the two candidates structure their child-care plans this way? That may seem obvious: Each candidate is appealing to its usual constituency. Republicans are using deductions to distribute money to wealthier households, which it considers an important source for votes and donations. Democrats, on the other hand, are using credits to funnel federal funds down the income ladder to working-class and minority voters.
But it’s not so simple. There are important political calculations for both Democrats and Republicans in the design of these two very different child-care tax plans.
How tax deductions and tax credits solve practical political problems during an election year
Political parties running national campaigns during a presidential election year have many goals. I explain in a recent study how Republicans and Democrats use tax subsides to excite their base, reach out to swing voters and reduce negative perceptions of their party.
As we all know, tax policy is extremely complex. That allows both political parties to distribute federal money to the socioeconomic groups it favors — and to do so in ways that soften the usual criticisms against that party.
Here’s how the Republican Party does it
The Republican Party is commonly viewed as the party of big business and the rich. Those groups aren’t exactly popular with most voters. So how can the party reach out to moderate voters while still delivering government benefits to its traditional supporters?
One answer is to provide a new tax deduction on a social welfare issue like child care. This does three things. First, it offers financial assistance for a popular (i.e., middle-class) social goal, whether that’s helping with child-care costs or making it easier to save for college. Republican candidates can claim that their platform proposes a conservative policy solution to support struggling middle-class families, and swing voters, who pay less attention to policy details than partisan voters, will see this as a credible campaign promise.
Social welfare deductions also help Republicans protect themselves from Democratic attacks. Republican candidates know that they must offer voters more than just cuts to domestic spending. Republican-sponsored tax deductions for health care or paid family leave raid the policy territory that voters usually associate with Democrats. For example, some voters may hear about these two competing child-care proposals and conclude that there is not much difference between Clinton and Trump over the issue.
Third, only the most knowledgeable and educated voters understand the differences among tax deductions, exclusions and credits. This information gap allows Republican presidential candidates to distribute federal money up the income ladder under the guise of private-market policy solutions for economic insecurity. Wealthier Republican voters understand that this is not a traditional welfare program; this is a program that seemingly targets all families — but actually delivers more benefits to families like theirs.
Here’s how the Democratic Party does it
Democrats use the tax code to address their own particular problems during an election year. Many voters perceive Democrats as the party of “tax and spend” liberals. And working-class whites often view the party as handing out government benefits to racial and ethnic minorities whom some consider “undeserving.”
For instance, a Democratic candidate can preempt Republican attacks by offering new government tax credits rather than traditional government programs. Since Republican orthodoxy is that any tax break is a good tax break, it makes it difficult to criticize Democratic proposals that distribute federal money through the tax code. A Democratic candidate who offers a new social welfare tax subsidy is also appealing to moderate Democratic and independent voters who hold antigovernment sentiments.
Democrats have had an increasingly difficult time passing new forms of poverty assistance in an era of racial and political polarization. Supporting low-income voters through refundable tax credits is a way for Democrats to help low-income black and Latino voters without triggering a backlash from working-class whites.
According to my research with Christopher Ellis, voters see a difference between traditional welfare spending and a program like the Earned Income Tax Credit (EITC). Although both federal programs are directed at the poor, low-income workers who claim the EITC reduce their tax liability. If this is reduced to zero, they receive a tax refund check.
In this study, we find that voters view EITC beneficiaries as more deserving of federal benefits than welfare recipients. Although most voters do not know the details of the EITC they understand that recipients are working and paying taxes into the system. In the American lexicon, a taxpayer is a powerful and positively viewed protagonist deserving of relief and first in line for government benefits.
In addition, providing federal assistance through the tax code does not trigger the same racial stereotypes as do welfare spending and food stamps. In the same study, we find that voters do not use racial attitudes in evaluating EITC recipients in the same ways as they do welfare beneficiaries. Therefore, Democrats can use tax credits to target racial and ethnic minorities without conjuring up any of the usual stereotypes that are associated with federal spending on the poor, which may drive away some working-class white voters.
So this is why Trump and Clinton announced what, superficially, sound like similar child-care proposals, proposals that in fact are aimed at very different groups. In both cases, the policies help the candidates defy the less savory side of their party’s reputation while also funneling government benefits to their most loyal voters.
Christopher Faricy is an assistant professor at the Maxwell School at Syracuse University and author of “Welfare for the Wealthy: Parties, Social Spending, and Inequality in the United States.”
Note: This post has been updated to clarify that Hillary Clinton originally introduced her plan during the Democratic primary.