Direct Spending on Care Work: Thinking Beyond the Tax Code for Caregiving Infrastructure

Executive Summary

Addressing the caregiving crisis facing tens of millions of working- and middle-class families—and the entire United States—will require robust and well-designed policy solutions. This report highlights the economic and well-being impacts of the current lack of affordable, high-quality care choices, with a focus on paid family leave, childcare, and long-term care infrastructure. The caregiving crisis in the US affects nearly all of us, with the immediate burdens often falling on women, especially women of color, who provide a disproportionate share of paid and unpaid care—exacerbating existing racial and gender inequalities in economic security and workforce participation.

Public investment in caregiving infrastructure through direct federal spending is the only path to ensuring that families have access to the support they need to thrive. Relying solely on tax-based care policies, as many bipartisan and conservative proposals tend to do, is inevitably insufficient and inefficient, doing little to ensure the quality care and paid leave that America’s working- and middle-class families deserve while wasting funds on higher-income households and highly profitable corporations. This report offers a framework for evaluating care investment proposals through the dimensions of funding, access and reach, and quality. It then applies that framework to compare the strengths and weaknesses of various federal direct spending programs and tax expenditures and explores their impact on families, care infrastructure, and the workforce that is needed to provide quality early education and long-term care.

Key takeaways are as follows:

• The high costs of childcare and long-term care and the lack of paid family and medical leave create significant challenges for American families, especially working-class families but also middle-class families.
• Current tax expenditures for care are often regressive and inefficient as they primarily benefit higher-income families, fail to address systemic issues like supply and quality, and often involve eligibility requirements that exclude those with the most need for care.
• Direct spending programs, while generally underfunded, offer greater potential for ensuring quality care, building out the care workforce, and providing equitable access to quality services.
• Policymakers have the opportunity to prioritize caregiving needs through a combination of tax changes and increased direct spending.

Relying solely on tax-based care policies, as many bipartisan and conservative proposals tend to do, is inevitably insufficient and inefficient, doing little to ensure the quality care and paid leave that America’s working- and middle-class families deserve while wasting funds on higher-income households and highly profitable corporations.

Though 2025’s expected tax reform bill was an opportunity for constructive reform, indications are now that it will more likely be harmful. This report nevertheless offers recommendations for both the near and long term.

A comprehensive approach combining reformed tax policies—especially those that raise reasonable revenues to pay for care investments—with increased and well-designed direct spending is essential to strengthen caregiving infrastructure, enable greater workforce participation, improve child development outcomes, support economic well-being for families, and boost national economic competitiveness. While some tax-based care policies do benefit some families, they broadly lack the effectiveness, efficiency, and reach of direct spending policies due to their often limited flexibility in aligning with families’ preferences, weaknesses in ensuring both care quality and choice in care provider, and inability to even reach—never mind meaningfully support—families with significant care needs. If our goal is to ensure an efficient, effective, and equitable care infrastructure for working- and middle-class families of all races, genders, and communities—especially rural communities—policymakers should raise more revenues to boost and shift our national care investments away from tax-based spending and toward direct spending that provides families meaningful choices to meet their diverse care needs.

A comprehensive approach combining reformed tax policies—especially those that raise reasonable revenues to pay for care investments—with increased and well-designed direct spending is essential to strengthen caregiving infrastructure, enable greater workforce participation, improve child development outcomes, support economic well-being for families, and boost national economic competitiveness.

Introduction: Caregiving Needs and Policy Crossroads

American families face impossible challenges in meeting their caregiving needs. The lack of affordable, high-quality caregiving options creates a ripple effect that impacts not only individual families but also their communities and the overall economy. When forced to make difficult choices between work and caregiving, families may reduce work hours and lose income, in turn decreasing tax revenue (Maestas, Messel, and Truskinovsky 2024). Additionally, the strain of caregiving can harm both physical and mental health (Schulz and Sherwood 2008). A credible 2022 analysis estimated that guaranteed paid leave and universal childcare alone would grow economic activity by 4 percent of GDP—then nearly $1 trillion—from 2023 to 2032 (Moody’s 2022).

Many policy advocates expected the 2025 federal tax reform debate to serve as one opportunity to prioritize caregiving needs. By directing greater public funds toward caregiving programs and services, policymakers could have made a significant investment in the well-being of families. This outcome seems highly unlikely now given the makeup of Congress and the Trump administration’s priorities, but as policymakers fight over tax cuts for the wealthy and corporations, it’s worth remembering how that money could be responsibly spent.

Yet, there has been growing bipartisan recognition of the importance of public investment in caregiving. The Biden administration proposed significant investments in key areas such as childcare (Murakami 2024), paid leave (Mayer 2024), and home and community-based services (CMS 2024a). Similarly, as the Democratic nominee for the presidency, Kamala Harris proposed expanding Medicare to cover home health care (Luhby and Davis 2024), establishing national paid leave (Huckelbridge 2024), and capping families’ out-of-pocket childcare costs (Luhby 2024a). These proposals aimed to provide families with a comprehensive support system that enables them to balance work and caregiving responsibilities. By expanding access to affordable, high-quality caregiving options, policymakers can strengthen families, boost the economy, and promote the overall well-being of society.

Leaders and organizations right of center have also voiced support for greater federal investments in caregiving. For example, the 2024 Republican Party platform included the following plank:

Protect Care at Home for the Elderly

Republicans will shift resources back to at-home Senior Care, overturn disincentives that lead to Care Worker shortages, and support unpaid Family Caregivers through Tax Credits and reduced red tape. (The American Presidency Project 2024)

At a rally late in his 2024 presidential campaign, Donald Trump said

I am announcing a new policy today that I will support a tax credit for family caregivers who take care of a parent or a loved one. It’s about time that they were recognized, right? They add so much to our country, and they are never spoken of ever, ever, ever, but they are going to be spoken of now. (Luhby 2024b)

Unfortunately, no details have been shared subsequently, and the early months of the Trump administration and the 119th Congress have seen more proposed cuts than investments in care. Even if such a tax credit moved forward, there is a risk that it would disproportionately benefit higher-income households. For example, Rep. Blake Moore (R-UT) has proposed legislation similar to previous bills in Congress to expand the Child Tax Credit substantially (Moore 2025). However, the reform would do so by discriminating against people with the lowest incomes—a common shortcoming of tax subsidies—and excluding many citizens and other lawfully residing children and adults with their own caregiving needs, as well as by undermining abortion care. In addition to reducing support for immigrant families, undermining reproductive health care, shrinking investments in care for people with disabilities and seniors, and penalizing parents who are not married, the current Republican congressional majority could also make things worse by showering the wealthiest Americans with tax cuts that create political pressure to offset with reduced caregiving investments.

This report focuses on the need for greater investments in meeting families’ care needs through direct spending programs. Relying on tax subsidies alone will mean that we continue to fail tens of millions of hardworking families. While tax subsidies can help offset some caregiving costs, they will necessarily fall short of the scale and nature of the care challenges we face because they are insufficiently effective at supporting the families with the greatest care needs and ensuring availability of the high-quality care options that Americans deserve. Tax and budget proposals should be evaluated on how well they help American families meet their care needs now and in the future, including by ensuring adequate revenues to pay for necessary spending programs. A successful approach must rely on increasing direct spending and the revenues to fund that spending, ensuring that it’s seamless and affordable for each family to meet its caregiving needs. Though that outcome is highly unlikely in 2025, it’s important to understand what a government that took its responsibility seriously would do—and should do—in the years to come.

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