The taxing problem of bringing up baby on a meager wage

There are no easy decisions for Shanice Johnson when it comes to providing for her almost 7-month-old son, Aidyn. She is a single mother, and her monthly earnings of roughly $600 do not go far, given the costs of rearing a young child. She receives food stamps, lives in subsidized housing and gets free diapers from a nearby support program, but then there are things like clothing, formula and toys to buy — with no financial help from Aidyn’s father, she said.

“At this moment, I can’t guarantee everything that he needs will be provided to him,” Johnson, 23, told Al Jazeera. “In due time, I’ll be able to get it for him, but right when he needs it, I can’t guarantee that I’ll be able to provide it for him.”

Johnson, who lives in New Haven, Connecticut, works part time while finishing an associate’s degree at a nearby community college. When Aidyn was about 5 weeks old, she started going to the city’s Maternal and Newborn Outreach Support program, from which she gets two packs of 50 diapers, which last a month and go some way to alleviating the financial pressure. “I thank God that the diaper bank was there for me,” she said. “What would I have done?”

Even so, the stress is always there for Johnson. “It’s almost nerve wracking, almost brings you to the point where I’ll do anything just to get what my son needs,” she said. “And being at that point can become very dangerous.”

Johnson is not alone trying to bring up a child on a meager wage, and the financial stress is harder when there is only one breadwinner.

The poverty rate for children being raised by a single mother is high. A 2013 report by the National Women’s Law Center determined that close to 40 percent of female-headed families with children were in poverty, compared with under 20 percent of male-headed families and 7.6 percent headed by a married couple. And more than half of female-headed households were living in extreme poverty, with income less than half the federal poverty level.

Social safety net programs like Women, Infants and Children (WIC) and the Supplemental Nutrition Assistance Program (SNAP) don’t cover diapers, wet wipes or other necessities like soap and toothpaste. And not all low-income parents or families in poverty know where to go to receive free diapers.

A recent study published in Pediatrics, co-authored in part by Alison Weir and Joanne Goldblum from the National Diaper Bank Network, estimates that for a single parent working full time at the federal minimum wage, $7.25 an hour, diapers are 6 percent of the parent's gross income. And the emotional toll for parents who struggle to provide diapers affects their baby’s health and development, the report found.

And diapers are only part of the financial burden that a baby puts on new parents.  For low-income families, SNAP and WIC cover baby formula. According to WIC, of the 8.3 million people who received monthly benefits in the 2014 financial year, about 4.32 million were children, 1.96 million were infants, and 1.97 million were adult women. Formula bought with WIC or SNAP cannot be taxed. But formula bought outside those programs is subject to various state sales tax laws. Most states do not tax groceries, including baby food, but some do, such as Alabama, Mississippi and Idaho.

And then there’s child care. A 2013 report from the Urban Institute, a liberal-leaning think tank, found that the average annual price for an infant full time at a child care center ranges from $4,600 in Mississippi to $15,000 in Massachusetts. The Child Care Development Fund provides a federal block grant for child care to low-income families. But if a family earns too much to qualify, child care expenses can outstrip income gains.

Elaine Maag, a senior research associate at the Urban Institute, told Al Jazeera that in all likelihood there is “a valley where you owe more for child care … because your income is too low to qualify for the child care credit but too high to qualify for child care subsidies.”

Up to a certain income threshold, parents are eligible for federal child tax credits. There is also the federal earned income tax credit (EITC), and, according to the Center on Budget and Policy Priorities, 26 states have their own earned income tax credits.

It gets complicated. In data provided by the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution, in 2015, a family with one child and income of $9,880 to $18,110 is eligible for a maximum federal EITC of $3,359. A family with three children that earns a minimum of $13,870, is eligible for a maximum EITC of $6,242. But that system relies on parents filing tax returns. For people with income is below a certain threshold, filing a tax return is not required. 

“We know many people who are eligible for those benefits don’t ever go in and apply for them and don’t receive them,” said Maag. “So it is possible you will choose not to file a return, in which case you will not get the earned income tax credit.” According to the IRS, the percentage of Americans eligible for an EITC who take it is 80 percent.

"As a general rule, tax law is not something which comes easily for most individuals," said Dominic L. Daher, the director of internal audit and tax compliance at the University of San Francisco. "The EITC is no exception. In fact, the EITC is so complicated, the Internal Revenue Service has an entire 36-page publication dedicated solely to it."  

Low-earning parents are disproportionately affected by sales tax. As a regressive tax, it makes no distinctions based on income and sucks up a greater share of earnings the less a person makes.

Baby clothes — the cost of which can run up to hundreds of dollars a year — are generally subject to the normal clothing sales tax of each state. Eight states exempt clothing from sales tax, including Minnesota and Vermont. Other states exempt clothing below a certain threshold; New York exempts items under $110. 

With an exception for diapers for disabled children, states individually decide whether to charge sales tax on baby diapers. According to a survey conducted by Weir, the director of policy, research and analysis at the National Diaper Bank Network, with the help of law students, states that exempt diapers from sales tax include Massachusetts, Minnesota, New Jersey, New York, Pennsylvania, Rhode Island and Vermont. Connecticut, Maryland and North Dakota exempt adult diapers but not baby diapers. Five states have no sales tax of any kind. 

Many states tax baby diaper sales, and attempts have been made to exempt diapers from sales tax.

In 2011, the national Diaper Act — which would have made it easier for child care facilities to use federal money to buy diapers — failed to pass, and it’s doubtful that any kind of diaper subsidy will be raised on the national stage anytime soon. “I’m not sure there's any stomach in Washington for something big, so we're looking at mostly stuff on the state level,” said Weir.

But results at that level are slowly moving forward.

This year, Connecticut made an attempt to repeal the tax on baby diapers. The bill got farther than expected but did not pass. In California, Assemblywoman Lorena Gonzalez introduced two bills. The first is a blanket diaper tax exemption, and the second would give child care centers diaper vouchers.

“What are we willing to pay as a society for something?” she told Al Jazeera. “Food is tax free, medicine is tax free, and some other things that fall into the absolute necessities, you can’t live without, and yet we’re taxed on them.”