As if Washington hasn’t spent enough taxpayer money this year, the Biden Administration and Democrats in Congress continue to push their $1.75 trillion 2,000-page reconciliation bill known as the Build Back Better bill. It hasn’t passed yet. Paging Joe Manchin!
One provision of the BBB bill that has received little attention is the plan to radically change early childcare (“pre-k”) education in America. At a cost of $400 billion in new spending, this “Toddler Tax” will punish middle class families by making pre-kindergarten more expensive and driving private providers out of the market. Two new BBB programs will create large subsides that will cap parents’ childcare costs at 7% of family income for those earning up to 250% of state median income (topping out at $429,000 for a family of four in D.C.). Both programs would initially be funded for six years.
Dr. Casey B. Mulligan, economics professor at the University of Chicago and former Chief Economist at the White House Council for Economic Affairs under the Trump administration, recently published a report that found that BBB would increase childcare costs by 102 to 122 percent. For those who don’t qualify for subsidies, which would be any family earning $1 or more over their state’s median income, that Toddler Tax will cost them $27,000 a year! That means 50% of families using paid childcare will face that burden. Even in 2024, when some of the subsidy requirements will change, Mulligan reports that 27% of families will pay double what they do today for childcare!
Mulligan doesn’t sugarcoat it: “It is challenging to forecast how families would cope with such harmful and disruptive changes in childcare costs. Many families may respond by withdrawing a parent or relative from the workforce to provide the care. Marriages may break apart. Parents desperate to avoid such elevated childcare costs may begrudgingly decide to put their children into the custody of aunts, uncles, or grandparents where subsidized care is available.” The Wall Street Journal agrees, calling BBB “an attack on work and marriage.”
These new programs that punish the middle class are being created to supposedly help lower income families. But they also subsidize high-income families in high tax states. According to a report from the Heritage Foundation’s Economic Research Fellow Rachel Greszler, taxpayer dollars in states like South Carolina will be redistributed to wealthy families in places like Los Angeles, New York City, and Washington, DC.
“Contrary to the presumed goal of helping lower-income and working-class families, it appears that childcare subsidies would be heavily skewed toward high-income families. For example, a couple making $343,600 in Washington, DC, would receive $30,300 in childcare subsidies for two children, while a couple making $53,000 in Mississippi would receive $17,600 in childcare subsidies for two children.” According to the income tables, a South Carolina family making 75% of our state’s median income will receive about $10,000 less in aid than those in Washington, DC who make over twice their area’s median income! Center-right groups are not alone in forecasting these massive costs. The left-leaning People’s Policy Project reports that in their estimate the average cost to middle income families will be $13,000. (PPP actually doubled down on their estimates when they received backlash from Democrats.)
BBB’s childcare schemes will not only punish middle income families financially, the planned new regulation of childcare services, with intrusive federal requirements, will make it even harder to find a provider because a majority of current providers won’t be eligible. Some families choose to use part-time options, like the over 50,000 families who currently use cooperative preschools. They won’t qualify. This means over 60% of the current childcare providers will not be eligible to receive government support.
Does anyone else have a sense of déjà vu? It was the Affordable Care Act that promised to lower healthcare costs with the additional selling point “if you like your provider, you can keep it.” If BBB passes in its current form, middle class Americans will get a right hook to go with ACA’s left jab.