Tax benefits proposed for childcare workers

Lauren Shores Pelikan, a University of Missouri School of Law professor, has proposed directing tax benefits to childcare workers to attract and retain the workforce needed to expand access to care. Her study, “Toddlers, Investors, and Tax Policy,” was published in the Southern California Law Review. She said the federal government provides some direct spending on childcare, but most of it is targeted toward children living in poverty. Shores Pelikan said the proposal would shift some tax incentives to the provider side, not just to childcare businesses but directly to the workers providing care. She said the goal is to get resources into those workers’ hands and give them a meaningful pay boost.

The source describes a childcare market facing both affordability and supply challenges. There are not enough providers and centers to meet growing demand. Because providers cannot raise tuition continuously beyond what families can afford to pay, many operate on thin margins and keep labor costs low. The source says childcare workers often leave for higher-paying jobs in other industries, which further exacerbates staffing shortages and limits the availability of care.

Shores Pelikan said cutting taxes for childcare workers could encourage more people to work in childcare or continue working in childcare. Workers may be willing to accept slightly lower wages if they keep more of their compensation after taxes, she said. That could decrease providers’ labor costs; because many childcare businesses operate on thin profit margins, she said even a modest reduction could improve profitability. Shores Pelikan said economic theory predicts that additional providers could enter the market when an industry becomes more profitable. The source says the shortage is compounded by private equity acquisitions, cost-cutting measures, tuition increases, fees and debt financing, with higher costs for families, increased turnover, lower-quality childcare and, in some cases, center closures. The study presents the approach as a proposal.