A Bigger Child Tax Credit Is Better Than More Child Care Subsidies

The Trump administration is reportedly considering a significant change to federal child care policy that would extend federal assistance to some married couples in which one parent works and the other stays home to care for their children.

The proposal responds to a legitimate imbalance in current policy. Federal child care programs and tax benefits generally provide assistance when parents pay someone else to care for their children, while offering less support when a parent provides that care at home.

But creating a new preference for stay-at-home parents would not fix that imbalance. Federal policy should remain neutral about how families arrange work and child care. Rather than subsidizing particular choices, Congress should provide support directly to families and allow parents to decide how best to use it.

A larger, fully refundable Child Tax Credit offers a better approach. Congress could finance the expansion on a budget- and revenue-neutral basis by consolidating existing federal child care subsidies and other child-related tax and spending benefits into one simpler benefit.

Current Policy Favors Particular Child Care Arrangements

The New York Times reports that the Trump administration is developing a proposal, backed by Vice President JD Vance, that could allow some married couples with a stay-at-home parent to receive assistance through the Child Care and Development Fund. Under the proposal described by the Times, one spouse would work while the other remained home to care for their children.

Such a change would represent a notable departure from the program's traditional structure.

The Child Care and Development Block Grant is the federal government's primary child care funding program. Together with mandatory funding through the Child Care Entitlement to States, it makes up the Child Care and Development Fund. The program provides subsidies primarily to lower-income families whose parents are working or participating in education or training.

States have considerable flexibility in administering the program, but federal law allows families to qualify with incomes up to 85 percent of state median income. States may impose lower thresholds and determine which work, education, and training activities qualify.

Federal funding for the program totals about $12.3 billion in fiscal year 2026. Even at that level, only 17 percent of eligible children age five and younger receive assistance, according to the First Five Years Fund.

Allowing stay-at-home parents to participate would broaden the types of families receiving federal assistance. But it would preserve the underlying problem: Washington would still be using federal policy to favor particular decisions about work and child care.

The Tax Code Adds More Child Care Subsidies

Federal support for child care is not limited to direct spending programs.

The Working Families Tax Cuts expanded several existing child care tax benefits. According to the Tax Policy Center, the law increased the Child and Dependent Care Tax Credit for some households, raised the amount workers can contribute to dependent care flexible spending accounts from $5,000 to $7,500, and expanded the tax credit available to employers that provide child care.

These policies generally provide benefits when families purchase child care or employers help provide it. The Child and Dependent Care Tax Credit, for example, helps offset qualifying care expenses incurred so parents can work. Because the credit is nonrefundable, its value is limited for households with little or no federal income tax liability.

The result is an increasingly complicated collection of spending programs and tax preferences that treats families differently depending on how they arrange child care.

Creating a separate benefit for stay-at-home parents would add another layer to that system rather than simplify it.

Federal Support Should Follow the Child

Congress should take a different approach. Federal support for families should follow the child rather than a particular child care arrangement.

The Child Tax Credit provides a straightforward vehicle for doing so.

Congress could consolidate existing federal child care subsidies and other child-related tax and spending benefits into a larger Child Tax Credit. Making the credit fully refundable would ensure that families with little or no federal income tax liability could receive the full benefit.

Most importantly, eligibility would not depend on how parents arrange child care.

A family could use the additional resources to pay for a child care center, hire a caregiver, rely on relatives, reduce a parent's working hours, or make it easier for one parent to remain home. Federal policy would provide the same support without attempting to determine which arrangement is preferable.

The reform need not require additional federal spending or revenue losses. Congress could redirect resources already devoted to existing child care and child-related benefits into the expanded credit, producing a larger and simpler benefit on a budget- and revenue-neutral basis.

Families Should Make the Choice

The administration's reported proposal highlights a genuine weakness in federal child care policy. Parents who care for their own children provide substantial value, yet many existing federal benefits are structured around purchasing child care outside the home.

The answer, however, is not to replace one federal preference with another.

Washington should neither favor the child care industry over parents who provide care themselves nor favor stay-at-home parenting over households in which both parents work. Families have different financial circumstances, careers, schedules, and child care needs. Federal policy should respect those differences rather than attempt to shape them.

A unified Child Tax Credit would provide assistance based on the cost of raising children while leaving child care decisions to parents.

CFE Takeaway

Congress should replace the federal government's patchwork of child care subsidies and other child-related tax and spending benefits with a larger, fully refundable Child Tax Credit. The reform should be budget- and revenue-neutral and available regardless of how a family arranges child care. Federal policy should support families raising children, while parents should decide whether paid child care, care from relatives, reduced work hours, or a stay-at-home parent works best for their household.