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House Bill 288 — Dependent care tax deduction

House Bill 288 — Dependent care tax deduction

Parrish Miller
March 9, 2023

Bill Description: House Bill 288 would substantially increase a redistributive state income tax deduction for dependent care. 

Rating: -1

NOTE: House Bill 288 is very similar to House Bill 177, introduced earlier this session. The only difference between them is a specific reference to IRS code. The substance and impact of the bills is the same.

Does it increase government redistribution of wealth? Examples include the use of tax policy or other incentives to reward specific interest groups, businesses, politicians, or government employees with special favors or perks; transfer payments; and hiring additional government employees. Conversely, does it decrease government redistribution of wealth?

State and federal tax policy subsidizes dependent care through targeted deductions and credits. In Idaho, the primary deduction for dependent care is limited to a percentage of expenses incurred, with a maximum of $3,000 for one dependent or $6,000 for two or more dependents.

While this deduction is available to anyone who cares for a dependent adult with disabilities, it applies primarily to child care expenses for children age 12 and younger. 

House Bill 288 would amend Section 63-3022D, Idaho Code, to increase the maximum deduction to $12,000 per tax year. The fiscal note for the bill estimates the cost of this increase at "up to $4 million per tax year."

While tax reductions that apply to most or all taxpayers are viewed favorably by most people, a tax policy that gives special deductions, credits, and carve-outs to a small subset of taxpayers redistributes wealth.

It is also worth noting that providing substantial tax benefits for specific behaviors or purchases (such as child care services) constitutes government intrusion into the market. It also inserts government into decisions about family life, shaping the cultural landscape. That is because these policies incentivize some choices and behaviors and not others. A family that chooses to outsource some of its parenting responsibilities should not receive a tax advantage over a family that chooses to care for its children at home.


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