ERIC Number: ED234904
Record Type: RIE
Publication Date: 1983-Jul
Reference Count: 0
The Inequities of Salary Reduction as National Child Care Policy: Where Do We Go from Here.
The salary reduction plan for financing child care is of little benefit to taxpayers earning below 16,000 dollars because these working parents would receive equal or better value by using the child care tax credit. For income levels between 16,000 and 20,000 dollars, the salary reduction plan may have some marginal utility to working parents (that marginal utility increasing as the cost of child care increases). At 2,400 dollars of child care cost per year, the salary reduction option provides little benefit; however, at 5,000 dollars of cost per year, the salary reduction option could double the savings available to a family earning 20,000 dollars. Nonetheless, consideration must be given to how likely it is that working parents earning 20,000 dollars will spend 5,000 dollars on child care. For income above this figure, salary reduction offers substantial and ever-increasing tax benefits. Without federal government programs addressing the needs of low-income working parents, salary reduction becomes nothing more than a massive income redistribution plan on behalf of those most able to afford child care for their children. Further, salary reduction permits companies to meet parents' needs through government subsidy; with salary reduction no incentive will exist for business to establish alternate dependent care assistance programs. If salary reduction plans are approved by the Internal Revenue Service they should be capped at 3,000 dollars per individual. Savings thereby accruing to the federal government should be used to fund child care services for low-income working parents. (Author/RH)
Publication Type: Reports - Research
Education Level: N/A
Authoring Institution: Center for Public Advocacy Research, New York, NY.
Identifiers: Government Subsidies; Internal Revenue Service; Salary Reductions