Does the Tax Code Penalize Parenting?

I spent nearly a whole afternoon last week completing my taxes. My four-year old daughter made her way over to my desk and, seeing the stacks of papers strewn around, sighed and rolled her eyes. “Still doing taxes.” I was getting a little exasperated myself. My exasperation nudged toward resentment when I realized my family wouldn’t receive a tax credit we’d gotten in past years. The reason, in part, was my choice to significantly cut back on work in order to spend more time with my children, including the one I had been ignoring in order to finish our taxes.

“The mommy penalty,” I grumbled to myself.

Tax-related grievances abound this time of year. A perennial one is that the American tax code penalizes families, particularly those in which one parent has chosen to serve as a primary caregiver rather than hold a job in the paid workforce. For example, when an increase in the Child and Dependent Care Tax Credit was under debate several years ago, some Americans worried the change prioritized one type of child care over another and set up poor social incentives. “It’s one thing for society to treat stay-at-home moms with a certain disdain; it’s another for the president to get the government to discourage the choice to stay home by subsidizing the alternative,” wrote one contributor to the Washington Post.

Last week, looking at my tax forms, I felt a similar indignation. But had I been penalized? And do tax credits for working parents with high childcare costs drive parents into the workforce and discourage at-home parenting? These questions may come into to play again as Congress contemplates major tax reforms including a variety of child-related deductions, credits, and savings vehicles proposed by Donald Trump on the campaign trail.

The current child care-related benefits in our tax code are relatively modest and very complicated - two factors that suggest the current code has little impact on how families divide work and childcare duties. Right now, parents can set aside $5000 in child care expenses each year, excluding that money from their taxable income. They can also seek a tax credit for a portion of childcare expenses up to $6000 for two or more children. In the best case scenario, these benefits amount to a few thousand dollars, much less than the cost of childcare which averages over $9500 per child per year.

The complexity and, thus, unpredictability of the U.S. tax code means that modest tax benefits are not likely to drive significant family decisions. Different filing statuses, tax brackets, and deduction strategies all impact how much a household pays. Some benefits are refundable, meaning they apply to low-income households who don’t owe federal taxes, and some, like the child care credit, are not. And only taxpayers whose employers participate in the pre-tax savings program can exclude child care expenses from taxable income. Sound confusing? It is. Even according to tax experts. That’s why a family’s core values and their financial situation is more likely to drive parenting and work choices than modest tax provisions. Pew Research Center found, for example, that mothers who said they “don’t even have enough to to meet basic expenses” were more likely to identify full-time work as their ideal situation than women who said they “live comfortably.” Those in the comfortable situation were more likely embrace part-time work or at-home parenting.

From a Christian public justice perspective, government should take steps to help families flourish and empower parents to care for their children. Not only do families have a Biblical charge to rear and educate children, but social science demonstrates that strong parental involvement makes a marked positive difference in a child’s development and future opportunities.

We should seek public policies that enable families to flourish.

However, we should advocate for pro-family public policy with care. Not every policy that helps working parents necessarily discourages or disparages at-home parents. Likewise, policies that favor stay-at-home parents may not incentivize at-home parenting and, in some cases, merely reward parents who chose to stay home and have the means to do so.

Instead of penalties and rewards for family choices, we should seek public policies that enable families to flourish. In the big picture, families need many things in order to flourish, from safe communities to strong family models and social networks to the time to spend on caregiving. For the sake of this discussion, we’ll consider two types of family-supportive policies: boosting low-income household finances and supporting work-flexibility for parents.

When families file their taxes next week, many will receive a $1000 tax credit for each child in their household. The credit does not distinguish between working parents and at-home parents. Families can use the credit to cover either childcare expenses or support an at-home parent. Research demonstrates the value of this approach. For low-income households, each thousand dollars in annual income makes a measurable impact on a child’s school performance. Increasing the amount of the credit for low and modest income families and making more of it refundable could expand these benefits especially for the 40 percent of American children who are living in households that are poor or just getting by. A sizeable credit could help families secure better child care, allow a parent to stay home, or minimize the strains of poverty on a family.

Thinking even more broadly, we might focus on policies that enable parents to strike the balance between wage-earning work and at-home work that best supports their family. Although policy-makers sometimes envision a strict divide between provider-parents and at-home parents, this vision is out of step with the modern economy. It is also not particularly Biblical. Writing for Mere Orthodoxy, Hannah Anderson recently traced the separation of the home from the marketplace during the Industrial Revolution and the impact of that history on modern families. She argues that the Biblical mandate to fill the earth and tend it calls for an integrated vision of marketplace and home rather than an either/or relationship or a dominance of one over the other.

In practical terms, a more integrated vision of paid-work and home-work may mean more part-time work, entrepreneurship, or flexible work wherein parents can fit when, where, and how much they work to the needs of their families. Anderson encourages, for example, exploring how the emerging gig economy can free women to “pursue a kind of work beyond the immediate family while ensuring that they also maintain the ability to make decisions that strengthen and build their immediate families.” Policy can support these arrangements by removing barriers such as the difficulties that part-time or self-employed working parents face securing health insurance or retirement savings.

A little over a year ago, I was not one of the parents whose time centered around the home, but rather one of the moms rushing to pick up my children from daycare before the end of the day. I recall chatting with fellow working mothers about all the ways our society makes work impossible for parents, discouraging us from using our God-given gifts in fields like health care, international policy, or teaching. In a society as diverse and competitive as ours, it’s easy to identify someone who seems to be getting a better deal than ourselves. Our challenge as Christian citizens is to measure public policy not just from our perspective at any given point in time but from the standpoint of public justice - one in which institutions like work and family work for the good of all members of society.

-Rachel Anderson is a Fellow at the Center for Public Justice. She is an attorney and founder of the Faith & Credit Program at the Center for Responsible Lending.