This story was originally published by The 19th.
As efforts to expand the child tax credit and provide paid family leave have stalled at the federal level, states are increasingly incentivizing private employers to step in and fill one of the other most painful gaps for working parents: child care.
According to the National Conference of State Legislatures, 17 States offer child care tax credits to “employers who operate or contract for child care services for their employees.” These states are Arkansas, Colorado, Connecticut, Georgia, Illinois, Iowa, Kansas, Maryland, Mississippi, Montana, New Mexico, New York, Oregon, Rhode Island, South Carolina, Virginia, and West Virginia.
Eric Syverson, senior policy specialist with the National Conference of State Legislatures' fiscal affairs program, said the conversation about a federal child tax credit is driving bipartisan consensus around finding ways in the tax code to help parents and families in need of child care.
“I think states have realized that the federal government is temporarily considering another increase in these tax credits — the child tax credit, the child and dependent care tax credit, the EITC (Earned Income Tax Credit). We could benefit from that increase as well if we pass our own. And that’s what we’re seeing a lot of states considering now,” Syverson said.
She added that the biggest beneficiaries of state tax credits are large corporations that can afford the costs of child care. Even with the growing popularity of the credit, a relatively small percentage of businesses take advantage of it. Syverson attributes this to the high costs of setting up a child care center and a general lack of awareness among larger companies about the tax credit. According to the Bureau of Labor Statistics, only 12 percent of all workers had access to child care benefits through their employer in 2023.
Jessica Chang is the co-founder and CEO of Upwards, a child care marketplace that connects families with child care providers, assists child care providers with business needs, and helps businesses and government entities create child care benefit programs for their employees. Chang said her company operates across key stakeholders in child care: employers, government, families, and child care providers.
Initially, Upwards can work with employers to connect employees with nearby child care providers — a more viable and cost-effective option than building an on-site facility. The company can also use employee data to personalize child care benefits. For example, if Upwards notices that employees are taking time off work to care for their children, it can recommend providing backup care credits to enable families to find providers during nontraditional hours.
“By partnering with Upwards, we have been able to help our (employees) find trusted providers who can accommodate the various work schedules found at our properties,” Susan Loveday, vice president of human resources for Dollywood Parks and Resorts, told The 19th. “Additionally, to assist with the cost of child care, we offer a monthly stipend to those (employees) whose children are cared for by an Upwards provider.”
For Chang, child care as an employee benefit could be more like health insurance, or even more important.
“That’s why there needs to be engagement between employers and government to normalize it and say, ‘This is not a social problem. It’s actually an economic problem. It’s not a mother problem. It’s a family problem,’” Chang said. “Employers, for example, are not trying to say, ‘Hey, we’re going to try this and if it doesn’t work, we’ll back out.’ They’re actually saying, ‘How do we make this successful so that there are no more problems? How do we do this for two or three years because we want to make sure it’s done correctly?’ And that’s a significant change from, say, just checking a box.”
Federal action on child care and other family policies has moved slowly. Last month, Senate votes against larger child tax creditIn addition, federal law does not guarantee workers paid days off to meet their parental, medical and family care responsibilities.
But there have been efforts at the federal level to encourage businesses to help employees with child care, a measure that has support from both Democrats and Republicans.
In 2022Congress passed the CHIPS and Science Act, legislation that allocated $50 billion to companies that expand semiconductor manufacturing and research and provide child care to their employees.
When President Joe Biden was the Democratic presidential nominee, in a debate with former President Donald Trump, he… saying“We should significantly increase the child care tax credit. We should significantly increase the availability of women and men, or single parents, to be able to go back to work. And we should encourage businesses to maintain, to have child care facilities,” as ways to deal with the child care crisis.
The Heritage Foundation, the conservative group that created Project 2025A proposed plan for former President Donald Trump's potential second term calls for Congress to encourage workplace child care for employees, saying it “puts the least stress on the parent-child bond.”
Some experts argue, however, that employer-sponsored child care is only a temporary solution to the child care crisis and raises equity issues.
For Elliot Haspel, a senior fellow at family policy think tank Capita and author of “Crawling Behind: America's Child Care Crisis and How to Fix It,” employer-sponsored health insurance and its “uneven results”The fact that this is reflected in child care is something people should look closely at. Haspel writes, “The only real solution to America’s child care needs is a system of choice funded by a permanent stream of public dollars,” and employer-based taxes are one way to begin raising those funds.
“We have a lot of precedent at the state and local level for fair ways to fund more affordable, accessible, high-quality child care,” Haspel said. “In Vermont, they’re funding a major child care reform bill through a small payroll tax, 0.44 percent, 75 percent of which is borne by the employer, and business owners, one after another, went to the legislature and basically said, ‘Tax us. This is important, it’s worth it. ’ That’s the kind of employer activity we need.”
Similarly, she said, Massachusetts, Washington DC and Portland have taxed high-income households to help pay for child care.
“When we care about something and decide it has enough social value, whether it’s public schools, roads or parks, we find the money,” Haspel said.
Casey Peeks, senior director of early childhood policy at the left-leaning Center for American Progress (CAP), believes employers should be more active as advocates for child care funding, citing the Council for Strong America's report that says the child care crisis is costing the United States 122 billion dollars Every year, the company loses revenue, productivity and income. It considers child care to be both an economic and social problem.
“I describe it as a public good because I’m not a mother, but I still benefit from child care. Every day I take the subway to work and I benefit from the fact that my subway driver, my bus driver, has their child in a safe, high-quality child care program so that they can go to work and I can go to work,” Peeks said. “I definitely think that businesses have a role to play and it’s in their best interest that we don’t have a child care crisis. … I think that whatever employers offer should hopefully be in addition to whatever is provided through public investment.”
Another aspect of the child care crisis is supply. A June 2024 report from the Federal Reserve Bank of Chicago found that despite rising child care costs, child care workers earn an average of $100,000. $14.60 per hourThe Chicago Federal Reserve attributes the supply squeeze to low wages and high job responsibility; child care employment in the fourth quarter of 2023 was 9 percent below pre-pandemic levels.
Anna Lovejoy, director of early childhood policy at CAP, acknowledges the effort states are making to address the child care crisis, but she is not convinced that incentivizing businesses to provide care will help with the supply problem and could potentially create equity issues.
“When you tie child care to employment, if someone loses their job or decides to leave, they don’t have child care while they’re looking for work,” Lovejoy said. “And that creates a disadvantage for families. I think it also creates a kind of equity issue for those who have jobs and those who don’t have jobs, those who have child care and those who don’t.”
