HOW DO WE MAKE AFFORDABLE, HIGH-QUALITY CHILD CARE AVAILABLE TO UTAHNS?

Quality child care is expensive for most, often costing as much as college tuition. However, unlike college, most parents cannot save ahead for early child care, and there aren’t low-interest loans available for child care expenses.


5 Public policy suggestions

1. Expand eligibility for subsidies. Subsidizing childcare costs is the most direct way to improve a family’s ability to afford quality childcare. However, existing income limits to qualify for subsidies create “cliff effects” in which families lose subsidies once their income reaches a certain amount, but often before they can afford childcare out of pocket. Cliff effects encourage some parents to choose not to work, or to work less, in order to qualify for subsidized childcare. This is the opposite of what many subsidies try to do. Some states avoid these problems by raising income limits, helping lower-income families afford childcare while remaining in the workforce. California and Maryland are recent examples.

2. Expand pre-tax programs & tax credits. Tax deductions and tax credits can increase affordability. Currently, pre-tax income can be saved for early child care expenses via the Dependent Care FSA, but families cannot save more than $5,000, annually. Similarly, the federal child and dependent care tax credit allows parents to deduct eligible child care costs from their taxes, but it is capped at $3,000 for one child and $6,000 for two or more children. The tax credit is not refundable, so it does not benefit the lowest-income families who do not earn enough to owe taxes. In 2015, for instance, the average credit was just $565. Utah could create or expand state-wide programs similar to these, or provide employers with incentives to offer benefits that defer some child care expenses.

3. Link existing corporate incentive programs to child care. Like many other states, Utah offers tax incentives to companies who make significant investments in our economy. The program is administered by the Governor’s Office of Economic Development. The majority of the incentives are payroll tax discounts, but significant capital investments also get sales tax discounts. They are post-performance in nature, so the state doesn’t pay anything unless the investments are made and perform according to expectations (e.g., # of workers paid at x% of the county average wage). Why not add child care as one of the qualifying investment for this program? In addition to the obvious benefit of rewarding companies who offer child care, this could further differentiate Utah from its peers. Furthermore, the multiplying effect of a robust child care sector has broad impacts on any local economy. Given Utah’s large rural population, there are targeted investments which could also be included (e.g., travel costs subsidies for distant child care).

4. Support legislation for early education. Local educators are already working with state legislators to expand our early education system, including all-day kindergarten. In addition to legislative support, the voice of parents and employers is needed to prioritize this and link it to our child care needs.

5. Offer state income tax credits for child care investments. Provide state income tax credit to individuals and businesses for qualified contributions to child care providers. Contributions would be used to establish and operate licensed child care facilities, fund grant programs (scholarships) for parents who need help paying for care, and supplement professional development costs for individuals working in the child care sector. Colorado is leading the way with this exact program. See below.

Colorado provides a Child Care Contribution Tax Credit (CCTC) which allows individuals and businesses to claim a 50% state income tax credit for qualified contributions to child care providers (up to $200k).