Hacker News Reader

Comment by meric | Hacker News Reader

Taxes. A person staying home looking after the kids and cleaning after them is not taxed. If that person goes to work instead and leaves their kids with a carer, the person has to pay income taxes, the carer will also have to pay income tax, the business have to pay sales tax, the premise the business is staying at will also pay tax on the collected rent. As soon as you outsource caring kids there are 3-4 more sets of taxes to pay. 20% from the person, 20% from the carer, 10% for the business sales tax and perhaps an additional 5% on the tax on rent. Every dollar spent on childcare, 50% goes to the government. The benefit of going to work has to be twice as good as staying home with the kids, as determined by economics. I haven't even begun to mention the intrinsic benefits of spending time with your children...

View on HN

You can expand this to everything in your life you could pay for. Gardening, painting, car maintenance, cooking, cleaning, growing vegetables, hunting, making clothes, this list goes on.

Anything you can do yourself will save an enormous amount of money because using money is extremely inefficient.

Lets say child care costs you $12 an hour. That means staying home is 'worth' $12 an hour to you. In order to make it worth going to work, you need to make $12/hr + taxes. Otherwise youre actually losing money by going to work.

In other words, our tax system is encouraging people to stay home. Whether or not we want to do that is up for debate but we can fix this by 1) taxing stay at home moms for the value they are creating or 2) removing child care service taxes.

Its a valid argument.

> 1) taxing stay at home moms for the value they are creating

That sounds incredibly distopian.

Plenty of studies show the benefits of children being raised by their actual parents. If anything, the bias towards staying at home is not strong enough, because it only has negative motivators - the taxes on paying childcare / having a career. That doesn't make it any easier to have either or preferably both parents actively raise the child where neither of them have to be absent from their life to provide food and shelter, but it does make it harder to have both parents working.

But that hardship demonstrably does not outweigh the lost income, since so many households are two income with children in third party care services. I would hesitate to ever advocate trying to punish dual income households more for using child care services, since those are exactly the ones who often have no choice in the matter.

>> 1) taxing stay at home moms for the value they are creating

> That sounds incredibly distopian.

It sounds a bit sexist (as if moms should stay home and their spouse, male of female should be employed) - but it's only dystopian if society doesn't recognize that the work not only needs to be taxed, but also rewarded.

For example, with basic income - or simply by paying people to stay home to care for their kids. The problem with the latter is that it reinforces gender stereotypes in a job market where there is gender difference in pay (ie: all current real-world job markets) -- it makes financial sense for the one that makes the least above caregiver compensation to stay home. I'm sure there are other ways to combat this (say base compensation on whole-household income, so that the net will end up being roughly the same no matter who stays home) -- but it's not entirely trivial to figure out.

In Germany, you can juggle maternity and paternity leave as you please---the state only cares about the sum.

In Sweden, there's fixed maternity and paternity leave of the same length.

German fathers don't stay home for the kids much---it's almost all used by the mothers. Sweden's use-it-or-lose-it approach seems to work better if you goal is to get fathers to take time off.

> It sounds a bit sexist (as if moms should stay home and their spouse, male of female should be employed)

I never implied that. Preferably society would be rich enough both parents could raise their kids without having to fend for survival while doing so. I would hope we have advanced as a species enough at this point, generated enough wealth at this point, to enable that.

And if that were not possible, I know classical sexism would drive the women to stay home, but preferrably whoever preferred their job would continue working and the other could raise the children, irrespective of sex.

> For example, with basic income

UBI is almost certainly the optimal solution here. I'd argue because it enables that joint parental rearing much more often - if parents have any financial assets they could potentially both drop out of the workforce to optimally raise their child, and depending on their wealth they could both withdraw for variable lengths of time. Even in the worst case scenario one successful careered individual in a family of two with joint UBI should definitely be able to have a stay at home parent and a working one maintain a working class lifestyle.

> 2) removing child care service taxes.

Remove those taxes, and the new fees will just bump up to the same amount. The fees are where they are because people have been shown to be willing to pay them. Take out a cost center, and the bosses will simply pocket the difference.

That's why we should also lower barriers to entry.

1) taxing stay at home moms for the value they are creating or 2) removing child care service taxes.

Or 3) allowing a deduction from income equal to the amount spent on child care.

This is the option Canada takes, incidentally; the only thing I don't like about it is that you're not allowed to pay your spouse for child care, and so stay-at-home fathers end up without any taxable income and thus without any pension contributions.

How is that different from removing child care service taxes?

The only difference I can see if that you have to wait till tax day to get your money back.

Different people have different marginal tax rates.

Ah yes. So doing it on tax day actually saves people with higher marginal tax rates more money than those with lower ones.

Interesting.

The US does this, too, but it has a pretty low phase-out threshold and most folks with HHI > $100k don't see any benefit. In middle America, $100k is still quite good money, but not on the coasts.

Agreeing and amplifying your first point: it's worse than that, it's ($12 + incremental expenses [expressed hourly]) / (1 - marginal tax rate). You have to use marginal rate, not average rate here, of course. Incremental expenses (commuting, wardrobe, lunch, and other work-related costs) are surprisingly higher than most people realize.

For a couple in even a middle marginal rate, where the second worker would drive only 20 miles round trip [including to/from daycare site twice] ($10/day) and pay $5 more for lunch than eating at home and pay an extra $1000/yr for a work wardrobe, it's easy to need to cover $4000 just for the expenses of working, plus the ~$26K or so for childcare, so you need to earn $50K just to break even if your combined marginal bracket (fed + state + local + FICA + Medicare) is "only" 40%. It's even worse if the second full-time job requires an additional or better[more reliable] car, paying for parking, or any other recurring expenses. If the stress results in needing extra spa days, meals out because everyone's too pooped to cook, vacations to get back family time, etc, it can really sky-rocket.

In terms of time, you save two adult trips to daycare, the full commute, and all the coordination overhead of dealing with childcare provider issues (family daycare providers get sick, take their own vacations, and in our case, randomly closed on short notice sometimes).

My wife is highly educated and left a very good position because she would have otherwise been working only for her 401K contributions. Several years in, everyone in our family is thrilled with that choice, it's way less stressful overall, and I'm convinced our children are way better off for it. (Though our daycare costs and marginal rate were somewhat higher than the figures in this example, there are many cases where the economic cost to one spouse staying at home is quite low.)

On your second point, I don't agree that the tax system needs to be patched for this as a special case. IMO, we should reduce taxes across the board, but failing the will to do that, we should accept that the system creates these incentives and educate people as to the math and the reality that, with more than one kid pre-K, it's almost surely a low (or even negative) cost for one parent to stay home.

Taxing a stay at home parent for imputed childcare costs is a crazily slippery slope. Must I pay taxes if I do my own dishes, clean my own house, cut my own grass, do my own laundry, cook my own dinner, fix my own brakes, clean my own gutters, fix my kid's broken toy, etc, etc?

Actually, you can't. If you're growing vegetables, after taking out taxes, you still have a vegetable. If you're cooking, after taking out taxes, you still have a meal. If you're hunting, you still have the meat. If you're making clothes, after taxes, you have some clothes. These goods go back into the economy as capital - the clothes on the back of labourers. The meal workers eat during lunch.

For childcare, there's only the adult's attention that enabled the child to mature one more day - but one could have stayed home and taken care of the child anyway, so there's no marginal gain to getting a carer unless the carer is really good and really imparts a tremendous positive impression on the child, or if one is a worker especially valued by the economy, such as one of a few nuclear scientists or doctor or software engineer.

If there's no tax effect, you only need to be marginally more productive at your job than the carer for it to be worth getting a carer. With the effect of taxes, you need to be a lot more productive.

Whereas if there's goods produced, it's almost always worth it for someone in the economy to be doing that, even with income taxes, because the resultant goods is capital that drives the economy forward.

It seems like your argument would work for any service job?

Any service job where most people who are polite and literate can do the job well - there's no goods produced and no labor specialisation benefit, and so get hit more heavily by taxes.

There's labour specialization benefit just from allowing parents to engage in more specialised labour, isn't there?

Yes I mentioned those further up the thread. Childcare is unaffordable for workers who can be replaced by most people.

or if one is a worker especially valued by the economy, such as one of a few nuclear scientists or doctor or software engineer.

What about higher labour productivity that comes from one adult looking after more children than their own family?

That labour productivity as mentioned will have to be twice or three times as much to make it worth it. If you have 3 kids, sending them to childcare will cost as much as the wages that would be paid in a full time job, even though in the childcare centre one adult is looking after 15 kids, due to taxes and rent.

To clarify: anything you can do just as well yourself will save an enormous amount of money.

But in a highly specialized society, different people do different things very well -- sometimes orders of magnitude better. Paying some guys to replace my windows is much more efficient than trying to do it myself.

(I'm presently a stay-at-home dad. Not only can I do it just as well as others, but the marginal benefit of a second income is much less than the marginal benefit of being able to take care of my child and my house exactly how I want to, and the enjoyment I get from those things.)

> Anything you can do yourself will save an enormous amount of money because using money is extremely inefficient.

In some sense it's the other way 'round: division of labour is so stupidly efficient, that the state can tax the hell out of it, and it's still better than doing most things yourself.

Alternate view : most people are either inept or convinced they are inept. Even larger projects like building a house from what is delivered to a building site these days is something I'd expect anyone with good mechanical understanding to do from scratch. Yet we pay people 200000 and upward to do it. To be honest, the non-regulatory reasons to have anything other than laying a foundation (ie. you start with a stable concrete slab in the ground) done for you are very few these days.

You could frame, drywall, paint, roof, shingle, wire, install plumbing, dig and pour the foundation of a home with just 2 people but it would be much faster to have different people specialize and work on the individual parts.

And, I would be a horrible bricklayer compared to someone who enjoys the job. (Like Winston Churchill did.)

Nonsense.

This is a particular and unusual case where specialising does not improve efficiency much. Cooking and cleaning are similar. It still improves efficiency by 100% or more (most of that being the tax man's cut), not by that orders of magnitudes in other products of services.

When our first child was born, the math was pretty obvious and my wife kept working. When our second child was born and our preschool/daycare costs went from $1250/mo to $2650/mo, it was not nearly so clear. Ultimately, she kept working because we determined the opportunity cost of taking years off (and missing those 401K contributions) would far outweigh the outlay for childcare, but we did think long and hard at that point. Childcare was consuming >50% of her take home.

EITC and in some locations child care credits, may offset this. Alternatively, tax internalises externalised social costs. Flipping your argument, since self-provisioned childcare isn't taxed, there's an effective subsidy for this.

I agree. I will be surprised if the facilities dont have to pay some kind of liability insurance too to protect themselves from legal abuse.

However there is no evidence spending time with children has any benefit.

Intrinsic benefits = the good feelings and relationship building you get from raising your own child, as opposed to spending your time & attention serving strangers in a restaurant.

Reply on news.ycombinator.com