We could directly address the high cost of child care by providing or subsidizing such care, as France and Sweden do. (Congress does allow employers to, in effect, subsidize their employees’ child care expenses by letting them exclude a portion from their income. But many companies, particularly smaller ones, do not offer this option, and those that do can exclude only up to $5,000.)
A different approach would be to focus on the tax treatment of child care. We could increase the child and dependent care credit to include the full cost (or at least a higher portion of the cost) of child care, which would increase parents’ after-tax income. Or we could treat child care as a business deduction. This would let parents pay for it out of their pretax income, and would have the added symbolic benefit of acknowledging that child care costs are ordinary and necessary business expenses.
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