Closing The Gap

Joe Biden wants to give working families a break on child-care costs, plus paid time off and access to universal pre-K

The presumptive Democratic presidential nominee Joe Biden speaks at McGregor Industries on July 09, 2020 in Dunmore, Pennsylvania.
Spencer Platt | Getty Images

For many U.S. families, child care is simply too expensive. Parents regularly pay over $11,000 a year to send their infant to a child-care center, about $10,000 for toddlers and over $9,000 for 4-year-olds, according to Child Care Aware of America's 2019 report.

But former vice president and presumptive Democratic presidential nominee Joe Biden wants to alleviate that burden. Biden is set to unveil a $775 billion policy plan on Tuesday that aims to make child care more affordable, while adding support for the early education industry as a whole.

"Even before the pandemic, millions of working families were faced with enormous personal and financial strains, trying to raise their kids," Biden said in a speech Tuesday. "We can make high-quality child care affordable and accessible."

What Biden is calling for with his new child-care plan

To help ease the burden for working parents, Biden's plan calls for 12 weeks of paid family leave and access to free universal pre-kindergarten programs for 3- and 4-year-olds, two policy proposals that have been widely supported by Democrats. Biden's plan also calls for expanded access to after-school, weekend and summer care for school-aged children.​ 

Biden also plans to make it easier for families to afford care for young children through a cost-lowering proposal that gives families with kids ages 0 to 5 the option of a tax credit or subsidy. Families that opt for the tax credit can get up to $8,000 ($16,000 for two or more children) to help offset the cost of child care for those under the age of 13, according to senior campaign officials. The credit would cover up to 50% reimbursement of child care costs for families making less than $125,000 a year. Families making between $125,000 and $400,000 would receive a partial credit.

Average weekly cost of different types of child care in the U.S.

Type of ProviderAverage weekly cost in 2013Average weekly cost in 2019
Nanny$472$565
After-School$181$243
Child Care Center$186$215
Family Care Center$127$201
Au Pair$360$401

Source: Care.com

Parents who aren't interested in a tax credit could opt for a subsidy. Biden's plan, which is modeled off the ​Child Care for Working Families Act proposed by Senator Patty Murray (D-Wash.) and Congressman Bobby Scott (D-Va.), calls for child care assistance for families earning up to 150% of their state's median income, no matter the type of care they choose. No family earning below that will have to pay more than 7% of their income, according to campaign senior officials.

Under Biden's plan, parents would be able to go to a federal website and search for participating child-care centers in their area and apply to the program. Once approved, the state would notify families of the amount they are going to pay and reimburse child-care centers on the back end. "This would save families thousands of dollars and more importantly, give them peace of mind," Biden says. 

Nearly 3 out of 4 parents spend 10% or more of their household income on child care, according to Care.com's annual Cost of Care Survey released in June. About 55% of families surveyed report spending at least $10,000 per year on child care.

And those costs continue to rise. Daycare and preschool expenses grew almost twice as fast as overall inflation between 2000 and 2019, according to data from the Bureau of Labor Statistics analyzed by Elise Gould, a senior economist with the Economic Policy Institute. Daycare and preschool inflation grew 94% while overall inflation grew 48% from 2000 to 2019, Gould found.

While income levels vary broadly by state, a family earning roughly $100,000 per year would typically be covered by the proposed subsidy program, says Katie Hamm, vice president of early childhood policy at the left-leaning Center for American Progress in Washington, D.C.

Previous analysis of the Murray legislation shows that the typical family would pay no more than $45 a week for child care. For low-income families, early child-care costs would be fully covered. "The most hard-pressed families won't have to spend a dime," Biden said Tuesday. 

While the tax credit may help higher-income families more, the subsidy plan would be helpful for many, if not most, eligible families, Hamm says. "They would get direct assistance to help pay for child care rather than having to wait for their tax credit when they file," Hamm tells CNBC Make It. "Because family payments are capped, a family at $100,000 is only going to pay $7,000 per year and that might be for multiple children."

Biden's plan includes support for the child-care industry

Biden's plan also calls for additional resources within the child-care industry, including better pay for workers and incentives to build more child-care centers. The plan calls for a construction tax credit wherein companies could receive credit for 50% of the first $1 million spent on constructing on-site care facilities, according to senior campaign officials. 

To help boost child-care worker pay, Biden plans to raise the federal minimum wage for all workers to $15 an hour, senior campaign staff tell CNBC Make It. Biden's plan would also require participating providers in his proposed sliding-scale subsidy program to meet wage and benefit standards and pay early childhood educators the same as elementary school teachers if they have the same credentials and experience. 

Biden's campaign estimates the plan, which also includes elder care proposals, will cost $775 billion over 10 years. Biden would pay for the plan by rolling back tax breaks for real estate investors with incomes over $400,000 and taking steps to increase tax compliance for high-income earners, according to a Biden campaign official. Combined, these tax loopholes lower wealthy investors' tax bills by tens of billions of dollars per year. 

The Trump campaign replied to Biden's speech on Tuesday by condemning the former vice president's entire agenda.

Check out: The best credit cards of 2020 could earn you over $1,000 in 5 years

Don't miss: Joe Biden's policy roadmap aims to create a new, federally-backed credit bureau to close the racial wealth gap

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