Expanding the Child-Care Tax Credit

Child-care A new bill introduced to the House by Rep. Allyson Schwartz (D., Pa.) and Rep. Michael McMahon (D., N.Y.) would expand the child-care tax credit.

The new proposal would allow a family with two children making $50,000 to claim a tax
credit of up to $2,100 for child-care costs, while under current law
the same family could receive a maximum credit of $1,200.

While this plan is certainly welcome, it's a drop in the bucket. In my area, a two parent working family might earn $100,000 before taxes, but spend $12,000 for one child in daycare. In many cases, childcare costs outstrip expenses on housing, food, and transportation. We have to do better.

49 thoughts on “Expanding the Child-Care Tax Credit

  1. I truly don’t see how, given the country’s current fiscal situation, we can afford a big tax cut for people making $100,000 and up. Whose taxes would be raised to cover the cost?

  2. I wonder if states could step in and offer credits instead of the federal government. Child care costs vary widely by state. I went from $350-400/mo. in AR to $850-1000/mo here. In one state where I lived, you could get state subsidies on a sliding scale based on salary, which seems fair to me. It’s sort of like college financial aid. The lower income families are subsidized in part by the government and in part by the families that are able to pay full price.
    And, I was just reading that tax credits really don’t help lower income families that much since they often don’t itemize. What they need help with is day to day costs, not a lump sum or lessened tax bill (if they have a tax bill at all!).

  3. I at least somewhat agree w/ y81 here- this is mostly a give-away to people who are already fairly wealthy. In a rich country like ours that might not be the worst thing, but we have many serious problems more important than this.

  4. In my area, a two parent working family might earn $100,000 before taxes, but spend $12,000 for one child in daycare.
    Hell, we pay $18k/year for the youngest and $16k/year for the oldest here in Pittsburgh (before tax credits).
    I find it hard to get too worked up about the cost, though — we’re asking someone else to care for them for the near majority of their waking hours. Why shouldn’t the cost be quite substantial?

  5. I know that $100,000 sounds like a lot to most of the country, but in this area, it’s middle class. That’s two teacher salaries. You need that much just to buy a home in a modest community. With two kids in childcare, working families are spending 1/4th of their income on childcare.
    Now, I absolutely believe that this is money well spent. The actual workers in these childcare center are paid minimally. I believe that childcare centers have to pay a bundle for insurance. However, middle class families are having a hard time handling these costs. 1/4 of one family’s income on childcare is huge.
    For me, Matt, childcare, education, and family politics are serious issues.

  6. Laura- I didn’t say that childcare isn’t an important issue. My point is that, before we transfer more money to people who are already fairly well off, we might see if that money can be better spent. Now, you don’t _feel_ wealthy. I understand. I don’t feel wealthy, either. But, even by US standards, you are wealthy. Why, when there are many other ways to spend the money, should we have a transfer that will, essentially, help you pay for a new porch or to take a nicer vacation? (As noted by Elizabeth, for poorer families this credit does nothing.)

  7. I know that $100,000 sounds like a lot to most of the country, but in this area, it’s middle class. That’s two teacher salaries.
    Is there a geographical progressivism to tax/income equality? Because it’s soundling like there should be. (Mobility tends to be overestimated by economists–it costs to move! Boy do I know that.) I betcha in the Dakotas $100,000 goes an insanely long way.
    I’ll have to keep an eye on this tax credit. My brother and his wife went to an expensive neighborhood in upstate NY for the schools, and the child care’s scaled to match. They’re not sure if she’ll be going back to work after maternity leave is up or not.

  8. Well, there’s one answer to my question: raise taxes on people in the Dakotas to subsidize child care for people in wealthier states. The plain fact is, $100,000 a year is well above the average income in every state, though admittedly not in every town or neighborhood.

  9. raise taxes on people in the Dakotas to subsidize child care for people in wealthier states.
    Leaving aside the unfairness of this all, these areas don’t have the population to help the larger areas. For example, South Dakota has 800k people and a gross state product of $37 billion. North Dakota is quite a bit smaller. Given what is already taken in taxes and the staggering poverty of much of South Dakota, I doubt you’d get more than a few billion extra with anything short of using cossacks as collectors.

  10. A family where both parents teach at the local high school (Masters degree, 10 years experience) pulls in about $100,000. They own a small Cape Cod home – 2 bedroom, 1 bath. After taxes, that’s $75,000. Take out $24,000 for childcare, $24,000 to $30,000 for mortgage and property taxes, + more for food, payments on two cars (a necessity if there’s two jobs), uncovered medical expenses, and that leaves nothing. There’s no savings and probably a lot of credit card debt.
    My hypothetical family isn’t poor, but they are definitely middle class. That’s vast numbers of Americans who are impoverished by childcare.
    But it was a mistake of me to mention an income number. I forget that other parts of the country have different numbers in mind. The middle class makes less in other areas, but their expenses are decreased also. It all evens out, I suppose.
    So, let’s just go back to the bill and get away from definitions of middle class. It’s still small beans.
    I spent most of last night at a town council meeting. The topic was how to pay for our schools when the tax levy went down. Disturbing numbers of people feel that in this economy we can’t afford to maintain schools.

  11. That hypothetical family would almost certainly be better off with only one person working for a few years. (You’d save the whole of the child care amount, probably only pay SS tax by the time you’ve got your deductions and could dump a car.) The better solution might be a way to make it easier to get back in the workforce after a break of a few years.

  12. We’re not discussing the income level that should be classified as “middle class.” We’re discussing whose child care costs should be subsidized, and by whom.
    I’m a flaming liberal, but I’m starting to seriously question governmental decisions on subsidizing a select set of activities, and the value judgments that entails. I want to backstop the poor from true tragedy. I want to pay for that, in spite of whatever moral hazard & value judgment it might create. But the lifestyle choices of people who are not poor? I’d rather they figure those out for themselves, and — shall I say it — lower taxes to let them pay for their own choices.
    Schools fit in another category, because they are a service provided to children, not to parents, who make the lifestyle decisions. I’m still going to advocate for those.
    I think we need to do some tough thinking about which services we think are the *most* important, and how we’re going to pay for them, and it can’t be by taxing the people in North Dakota (even if that would work). We’re going to have to have serious discussions about which of important priorities are more important (bigger class sizes in elementary? or child care credits? or libraries?, for example).
    Oh, and higher taxes are fine with me. But I think we’re going to have to use them for lots of things. And, I don’t like subsidies. I want to decide whether we want something enough to provide the service (i.e. schools) and not the subsidy. My contrary example used to be government age for secondary education, but I’m rethinking even that.

  13. Is full-time childcare and full time employment a lifestyle choice?
    Is this a rhetorical question? Obviously, the answer is that it sometimes is and sometimes isn’t. For the majority of people that would benefit from this credit, it plausibly is a “lifestyle” choice. Now, we’re a rich country, despite our problems, and can afford to subsidies some lifestyle choices if we choose. But we should be grown-up enough to be clear that that’s what we’re doing.

  14. “Is full-time childcare and full time employment a lifestyle choice?”
    Pretty much. People can do the math, and if it makes sense to work, given their child case costs, they can work. I don’t see a societal interest, in general, in subsidizing child care in order to change that math. What would the purpose be?
    I’m asking that question for real. In order to support a subsidy I’d have to feel that there’s social value created by the distortion of the market. There are potential answers to why those subsidies would be desirableness (i.e. we want to encourage 2 earner families, or we want people to maintain their skills, or we think that non-workers will eventually be an economic drain, so it’s better to keep everyone working).

  15. I would say that full-time childcare and full-time employment is a lifestyle choice. Certainly we have friends who made an alternative choice, so one spouse stays home with the children. I don’t see why the government should subsidize one over the other.
    We made our choice because, in my wife’s case, she can’t stand being cooped up at home with a crying child and dependent on someone else’s paycheck, and, in my case, I would feel unmanly staying home and doing housework all day. (Not unhappy, just unmanly.) There isn’t any reason for the government to subsidize our emotionally-driven choices.

  16. I don’t see a societal interest, in general, in subsidizing child care in order to change that math. What would the purpose be?
    Not to end up subsidizing the lifestyles of underemployed women after the divorce?

  17. “A family where both parents teach at the local high school (Masters degree, 10 years experience) pulls in about $100,000. They own a small Cape Cod home – 2 bedroom, 1 bath. After taxes, that’s $75,000. Take out $24,000 for childcare, $24,000 to $30,000 for mortgage and property taxes, + more for food, payments on two cars (a necessity if there’s two jobs), uncovered medical expenses, and that leaves nothing. There’s no savings and probably a lot of credit card debt.”
    1. How much would it cost to rent instead, at least until the kids are in school?
    2. Maybe NJ needs lower property taxes.
    3. I don’t think our hypothetical family ought to be financing TWO cars. If you can’t pay cash for a car, you can’t afford it, and certainly not two cars. (We carried a loan for one year when we bought our first and current car, but I am very, very pleased not to have a car payment.)
    Starting in July, we’re going to be paying $12,000 a year total for two kids in private school, which is somewhere in the same ballpark, but it means that a lot of other things have to be tweaked, which is what I’m in the process of doing.

  18. Two married teachers would have two pensions, wouldn’t they? Would they feel that they need additional savings for old age? (Let’s tiptoe past the question of the funding of state workers’ pensions.)
    An argument has reached its limits when one contemplates taxing residents of the Dakotas to subsidize Jersey yuppies’ lifestyle choices. Cost of living usually mirrors the prevailing wages in a given area. It might be a good idea for married NJ teachers to retire to the Dakotas, though.
    The new proposal would allow a family with two children making $50,000 to claim a tax credit of up to $2,100 for child-care costs, while under current law the same family could receive a maximum credit of $1,200.
    So, if the tax credit passes, look for child care costs to rise by an average of, oh, how about $900 per family?

  19. “Not to end up subsidizing the lifestyles of underemployed women after the divorce? ”
    Could be. How often does this happen (i.e. poverty induced by divorce that requires government subsidy)? And, would it be more cost-effective than subsidizing re-entry training?
    And yes, Amy & MH’s attempt to revise the family budget you suggested are indeed examples of why, on the whole, we’re calling this a lifestyle choice (as opposed, for example, a commenter calling me on the suggestion that attending bad schools was a lifestyle choice of the poor).

  20. Oh, and my questions are not rhetorical. For example, in calculating the cost-effectiveness of subsidizing child care we should be taking into account the taxes paid by the earners. The “SAHP” calcs always treat the taxes not paid as a savings, and only include the take-home pay as their loss. But taxes paid are a value to society. If tax rates are sufficiently high, the child care “subsidy” might just be a way to lower taxes so that the marginal tax rate on the decision-making employee is low enough to encourage their work (and payment of taxes).

  21. Over time, there have been many, many comments on this blog about how full time employment is not a lifestyle choice. In fact, choosing not to work is not only anti-feminist, it is also damn stupid. Waiting for those commenters to show up…
    re: cost of living around here. Yeah, it’s super expensive to live in this area of the country. Please don’t call us yuppies. Nobody likes it this way. Rent is also expensive. I have some friends who have a good deal at $1,000 per month, but it’s usually in the 2 grand area. That’s the same as a mortgage. And a car is a must. There’s no other way to get to a job, unless you commute to NYC.

  22. I don’t even know where to begin to enter this conversation. Is a two-income family a lifestyle choice? It seems to me that that’s exactly what the powers that be want or at least that’s where our economy is driving us. At then there’s the whole, do the math. Um, the math where I started when I was first pregnant was a whole lot different than where I ended up. See above.
    How could/should the government assist in paying for the costs of rearing children? That seems to be the question. As I said above, it seems like it would be most helpful to defray the costs up front rather than give back some of the costs as a tax credit. That still costs someone money somewhere, but it seems more likely to help low-income families whether single or dual-parent. If you can net enough money after childcare costs, it makes working easier. I also think there needs to be some sort of programmatic way to help parents who choose to stay home instead of using childcare (whether for financial or personal reasons) to get back into the workforce. These could be incentives for businesses in addition to incentives for individuals. And/or, we need to help parents make better financial decisions re: housing, etc. But honestly, as Laura says, there are places where if you’re not paying $500k or more for your house, you’re in a sketchy school district. That formula needs fixing.
    I think part of the problem here is that we’ve gotten away from the traditional family model. We have every conceivable kind of family and it would be difficult for the government to figure out what to subsidize. Where I see a societal interest is in having kids grow up to be contributing members of society. There are certain family situations, and I’m guessing none of us are in those, where some influx of money might help–paying for childcare, paying for private school, or paying a housing subsidy that puts them in a better school district.
    I don’t know–it’s so complicated I don’t even know how I feel about it anymore. What I do know is that I’d like to even the playing field so that everyone’s kids have the same advantages as mine do. How we get there is another issue.

  23. “An argument has reached its limits when one contemplates taxing residents of the Dakotas to subsidize Jersey yuppies’ lifestyle choices. ”
    I’m pretty sure that was a joke.

  24. I don’t see a societal interest, in general, in subsidizing child care in order to change that math. What would the purpose be?
    You hear about how hard it is to get back into the job market after a gap (which I might discover once my phd’s finished, yikes). There’s also generally economic concern about underemployment: I’ve heard people fret about unutilized potential in the German and Japanese (female) labor force. I’m not an economist, however, so I’m not sure; and this could be solved more efficiently with removing any penalty for stepping out of the market for a while.
    Tax credits are probably easier.

  25. “What I do know is that I’d like to even the playing field so that everyone’s kids have the same advantages as mine do.”
    I’d like to think I believe this. But, when I press the statement to details rather than a general sentiment, I realize that I probably don’t. We’re taking our kids to London this year. We’re excited about it, and my children are going to learn a lot. I’m pretty sure, though, that if someone proposed subsidizing a London trip for everyone who made under any amount a year, I’d object. It’s clearly a luxury, and not one that the general population should be required to subsidize through taxes (even if I think my kids are going to gain substantial advantages because I can pay for it).
    I think what I do believe is that I want to meat a standard of satisfactory and adequate for all the children. I don’t think we have that now, and that sentimentalizing equalizing the advantages whole population will actually impair our ability to fight for less than sketchy schools for everyone.

  26. Yes, bj–that’s a good point. I’m going to London as well, ironically, thanks to a generous father and generous friends with accommodations. So, no, I don’t want to subsidize trips to London. I want the schools to be equal. A school 10 minutes from here should not be dramatically different from the school my kids go to, but that’s the case. So, yes, we need a minimum standard for schooling, and that standard needs to be higher than what we currently have, and it needs to not be about testing.

  27. And yes, Amy & MH’s attempt to revise the family budget…
    Not to speak for Amy, but my revising of the family budget doesn’t really make much sense to me. Not that I’m flipping sides, because I think it could still leave more money at the end of the month than the two income hypothetical case. However, I don’t understand how anybody could manage (in a middle class way) on $100k a year with $24k on childcare and $24k on housing (let alone $36k). After taxes (which would be much closer to $30k around here), health insurance (probably at least $6k), and other necessary expenses, I don’t see how you’d make even one car payment and still buy shoes.
    Anyway, at various long past points, we had explored NYC or DC as places to live. Every time I looked at it, the numbers did not make sense to me.
    I guess this is a long winded way of saying, two cheers for peripheral rusted-out cities with declining populations and disposable income for nearly everybody above the median.

  28. Honestly, for a lot of people, two incomes (and full time day care) isn’t a lifestyle choice. The math sucks any way you slice it. They end up doing slightly better, if both people work than if one person works.
    I think I like the idea of subsidizing the daycares directly, rather than giving out tax credits. More funds could go to daycares with a higher proportion of low income kids. I think it’s a better idea politically, because then we don’t end up at this place – debating who deserves what. If we subsidize daycare, then the discussion becomes about how quality daycare is a good thing.

  29. I’m not opposed to subsidizing day care, especially for the poor. But the political science I learned was about “Who, Whom?” (Not about what’s a good thing: the number of good things is infinite.) Whose taxes are going to be raised (or whose benefits are going to be cut) to subsidize day care? If it’s childless high school graduates in flyover country, that’s fine, but have the courage to say so.

  30. The math sucks any way you slice it.
    I’ve always assumed that in most cases where the math sucks, most people involved are getting help or cheating. That is, family help (in cash or child watching) or some sort of tax evasion. I mean, the hypothetical teacher isn’t going to have 60 Minutes ask about the cash payments to the Guatamalean nanny she shares with her neighbor. And, collecting a full income tax from a self-employed whatever is likely to work about as well as trying to get me to pay PA sales tax on what I buy on Amazon.

  31. I can’t read all of the comments but I had to work to keep insurance because my husband is diabetic and was denied — I had NO CHOICE but to work and put my children into daycare — it’s not like I wanted to do that. I had dreams of it being different when I was much younger but obviously life is really different. some people have it better, some don’t. and just wait for college costs.

  32. “I think I like the idea of subsidizing the daycares directly, rather than giving out tax credits.”
    I’m actually more comfortable with that — and I see it as an extension of our public school system, to which I am firmly committed (yes, in spite of sending my kids to a private school. I want there to be a perfectly acceptable public school to choose if I wanted to, and I want that to be available for everyone.)
    I can see extending that into earlier years, and think that there would be society benefits. But I don’t think this is the time to be working on expanding the public school system.

  33. I guess this is a long winded way of saying, two cheers for peripheral rusted-out cities with declining populations and disposable income for nearly everybody above the median.
    Well said, MH. All praise Wichita! Here, full-time daycare and full-time work (for both partners) really is, for the majority of people anyway, a genuine lifestyle choice, about which the debate can go forward along different lines. Unfortunately, for innumerable reasons both good and bad, most of the wealth-creating jobs are in areas with a far greater cost of living than is the case in Wichita. In the cases of people who live in such situations, as Laura does, I’m very sympathetic, and that sympathy leads me to want to see daycare subsidized in certain parts of the country, as she does.
    That being said, I’m not sure I would go so far as to claim that there is never any choice involved–on some level, at the least, you are “choosing” to raise your children in a safe, middle-class or better environment, with all its attendant costs, and I know people who, for reasons of religion or (again) just “lifestyle” opt out of that. I wouldn’t make that choice, and I freely confess that, generally speaking, I am dubious of the people who do, because, in the end, I’m pretty damn bourgeois, and want my kids to be too. But that’s part of the reason why we, when we had the opportunity to move to Southern California for a good job there, turned it down: we wanted to be able to have the sort of social and economic “freedom” to choose to live something approaching a middle-class life which still having some flexibility in how to go about it. If we’d moved to Riverside, we would have had to either abandon that aspiration completely, or commit ourselves to the only way to make living it economically feasible. The higher the cost of living, the more absolute and narrow your range of choices.

  34. “[I] want to see daycare subsidized in certain parts of the country.”
    You know, I was joking when I suggested that the poorer areas of the country might be taxed extra to subsidize tri-state area suburbanites, but some people are apparently serious.

  35. I’m not sure I see having two working parents as being a lifestyle choice. I see things like having a house in a certain area, or having cars that you have to have payments on (or having a car at all), or having certain consumer goods as lifestyle choices.
    Our day care was never more than $8K a year per child, fwiw. Then again, neither kid went into day care before 14 or 15 months old, so we never had infant care.

  36. “Could be. How often does this happen (i.e. poverty induced by divorce that requires government subsidy)?”
    The good thing is, the longer you’ve been out of the workforce, the older and closer to self-sufficiency your kids are. I know the situation of two ladies (one close relative, one my mom’s best friend) who got divorced at 40-50 years old. At that point, the women had spotty work records but their youngest kids had been out of diapers for a decade. Both women have had to really hustle. They’re both 60ish now and the one I know best has had to make tough choices, weighing her own needs for retirement and what her kids need to launch well. It takes a loooong time to launch kids these days.
    “Rent is also expensive. I have some friends who have a good deal at $1,000 per month, but it’s usually in the 2 grand area.”
    Rents are coming down, just as home prices are. That’s the one consolation of the economic situation for young families–housing is going to be affordable again.
    “However, I don’t understand how anybody could manage (in a middle class way) on $100k a year with $24k on childcare and $24k on housing (let alone $36k).”
    Laura did mention credit cards.
    “I guess this is a long winded way of saying, two cheers for peripheral rusted-out cities with declining populations and disposable income for nearly everybody above the median.”
    Woohoo!
    Earlier today, I was checking what Wikipedia had to say about average Montgomery County, MD incomes (we lived there two years and once thought of buying a house there). It’s a DC suburb, famed for its school system, but there are quite a few poor folk in the area. As I recall, Wikipedia says that average household income in the county is $90k and average family income is $106k, which is four times as much as the average income where we live now.

  37. lmc,There’s also generally economic concern about underemployment: I’ve heard people fret about unutilized potential in the German and Japanese (female) labor force.
    I remember reading an article, some years back, about efforts to increase the number of working mothers in Japan. I had not yet had any children, but even then I thought it a paper only a man could write. Germany and Japan have very high standards for child raising and housekeeping. Working women in Japan enjoyed the freedom from those expectations, and weren’t in a rush to have children, on the whole.
    It’s not a coincidence, perhaps, that Japan and Germany have very low fertility rates. If one could wave a wand, and increase female employment, what would that do to birth rates? Europe and Japan already face very difficult economic times. How many retired citizens can one worker support?

  38. cranberry, I’d agree, and say that policy makers worried about the future workforce depletion want it both ways: mothers at home and female workers. If there was only some way they could do it all!
    On the high standards, oh, like you wouldn’t believe. There’s classism to it (the couple that runs a convenience store–they eat the bento the store doesn’t sell–aren’t included in this picture, for example), but you know the traditional food rules that were being bandied about a while back? The one from Japan about five colors in each meal, which some food gurus/police were loving on? That’s part of the standard of having multiple side dishes for each meal (not just a grain and vegetable, which is what I grew up with). It’s a lot of labor to put out dinner.
    If you go to the frozen foods section of a Japanese supermarket, it’s not frozen entries–it’s frozen side dishes, like seasoned spinach and gyoza and the like. Stuff to put in bento, or on the table, because you can’t skimp on variety.
    Rules for cleaning can be just as complex, but I don’t think there’s quite the same social standards there. (Or maybe just because I tend to stay on the edges of immigrant and day-laborer neighborhoods….)
    (I love the result, but I couldn’t do that even living on my own. I’m a one-pot dish or convenience-store bento person when there. Or sandwiches.)
    Employment in Japan also has another problem with the Lost Generation, who remain underemployed. And “parasite singles.” But increased childcare before school–and a relaxation on the rules against having two kids in child-seats on a bike–were some of the few serious proposals bandied about while I was there. And I think the Democrats put in a child tax-credit….

  39. You know, I was joking when I suggested that the poorer areas of the country might be taxed extra to subsidize tri-state area suburbanites, but some people are apparently serious.
    I don’t think a plan which allows for a limited but still meaningful subsidizing of daycare in parts of the country where the cost of living drives many middle-class aspirants into both-partners-working-with-full-time-day-care-for-the-kids mode necessarily comes down to a transfer of wealth from North Dakota to New Jersey, at least not any more than the fact that the bulk of America’s expensive national parks are in the West is necessarily a transfer of wealth. It’s about trying to preserve a minimal level of middle-class equality amongst as many American citizens as possible. Now, I am completely open to the idea that it’s the middle-class lifestyle itself which needs to be challenged; as I said above, I don’t think, even if you live in an area with a high cost of living, that going into the aforementioned mode has no element of “lifestyle choice” to it whatsoever. Obviously it does. It’s just that the stakes of those choices ride far, far harder on some families than others. So if we’re going to challenge (and provide plausible alternatives to) the worth of that particular choice, then we’re going to have to also challenge (and provide plausible alternatives to) lots of people quite reasonably choosing to live near where the money is.

  40. “Germany and Japan have very high standards for child raising and housekeeping.”
    Right. My younger sister was an exchange student to northern Germany in the previous decade, and she had a very serious apprenticeship in German housekeeping, which verges on OCD. Example: Sis is feeling very proud of a cleaning job that she did on her host family’s kitchen floor. It took 45 minutes. Host mom is unimpressed. “That floor looks like you only spent 45 minutes,” she says. As I recall, both families she stayed with were dual-income, but they made very effective use of their exchange students, one family having just canned a putzfrau for drinking their beer.

  41. “That floor looks like you only spent 45 minutes,”
    So, probably not a coincidence that two German brothers were the ones to popularize Cinderella.

  42. I feel like there’s some subtext here that women working is an expensive indulgence in itself. If only people didn’t want women’s fulfillment and consumer goods and selfish stuff like that, we could revert to the old model where there was one career parent and one career worker. When in fact two parents working seems to me like a very sane policy in an uncertain economy. If only one of us has the skills to get a good job with benefits, and that person gets laid off, then what?

  43. Germany and Japan have very high standards for child raising and housekeeping. …
    It’s not a coincidence, perhaps, that Japan and Germany have very low fertility rates.

    And very many German school days end at noon.
    On the other hand, very low fertility rates are found throughout Europe, even in messy countries.

  44. High social welfare expenditures on the part of the government lead to high taxes on the employed. Those who earn enough to be subject to the high taxes rationally choose to have smaller families, or not to reproduce at all.
    It will be interesting to see if the austerity budgets in Europe will have any correlation with birth rates. Logically, raising taxes, decreasing government spending, and a falling currency would make it more difficult to contemplate starting a family.

  45. “there’s some subtext here that women working is an expensive indulgence in itself”
    Not from me. My wife works. The expensive indulgence is that women whose families have incomes above the median (which is $70,000 in New Jersey) are entitled to federal tax dollars for their daycare, so the family doesn’t have to give up its second car.

  46. I feel like there’s some subtext here that women working is an expensive indulgence in itself.
    Or from me, either. One of my sisters is my model here. She and her husband have two kids. Her job was better than his and had more prospects and he likes kids pretty well, so she works full time, he works part-time and mostly watches the kids. I don’t think she would have married him if he had not at least been open to the idea. More women should demand as much. Beyond that, I at least partly agree with y81, especially when we remember that this credit, as it’s set up, doesn’t help poorer women because they don’t qualify for it.

  47. It will be interesting to see if the austerity budgets in Europe will have any correlation with birth rates.
    Nope.
    Or at the very least, don’t bet on it. Long-term (as in 40 years) OECD trend is downward. For a really serious drop, you have to have an economic catastrophe on the order of the collapse of communism. There are some places (France, Sweden are most often discussed) edging back up toward TFR but not many, and immigration often plays a significant role.
    Lots more in general here, and Europe in particular here.

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