How to make daycare more affordable? Missouri weighs tax credits for providers, employers

JEFFERSON CITY — The Missouri legislature is considering a trio of tax credits focused on child care as the state looks for ways to make the industry more accessible and affordable.

House Bill 870 from Rep. Brenda Shields, a St. Joseph Republican, would create three tax credit programs: one for donations toward child care providers, another for the providers themselves and a third for employers paying for employees' child care costs.

"We have a child care crisis," Shields told a House committee during a hearing Tuesday morning. "Our parents, employers, state and Chamber of Commerce have shared their frustration."

The proposals come as lawmakers explore options to make child care, which since the dawn of the pandemic has skyrocketed in cost and become less available to lower- and middle-income families, more affordable. Gov. Mike Parson has made children and families a hallmark of his legislative priorities this year, and members on both sides of the aisle have vowed to look for solutions to what has increasingly become a dire workforce issue for workers and employers alike.

Peak pandemic closures caused 30% of Missouri's child care providers to go out of business (only 3% have returned), and often subpar wages have failed to attract sufficient staff to care for the number of children on waitlists, a problem that has been recognized on a national scale.

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The consequences for the state's economy have been dire. A 2021 Chamber of Commerce report found that the state lost more than $1.3 billion annually as a result of child care shortages — spurring a renewed call from both local and state chambers for the legislature to address what has become an urgent workforce issue.

"If we want Missouri's economy to grow, we must address the child care issue," Shields said.

The first tax credit outlined under the proposal would allow the deduction of 75% of charitable donations made to a child care provider — designed to incentivize businesses and other entities throughout the state to invest in providers near their workplaces. Another credit, designed for employers, would create a 30% reimbursement for child care spending, up to $200,000 per employer annually. The third credit, targeted toward child care providers, would go toward payroll and improvement spending in an effort to incentivize higher pay and valuable facilities.

All three programs have an annual cap of $20 million each, but can be expanded beyond that $20 million if authorized and only for use in regions that qualify as "child care deserts." They would expire at the end of 2029 and can be applied back one fiscal year or forward five years.

The measure earned praise from business leaders across the state Tuesday, as well as representatives of child care facilities in Kansas City and St. Louis and advocates for the field.

"It's an innovative approach," said Robyn Schelp, the policy director for Kids Win Missouri, who has argued for a multi-faceted approach not just limited to government action. "We're not just going to hand out money."

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But some members balked at specifics within the proposal. Rep. Hannah Kelly, a Mountain Grove Republican who chairs the House children and families committee, was concerned that the donation-based tax credit could cause big businesses to donate and lock up enrollment spots for their workers, icing out smaller businesses whose workers are also in need of employer-sponsored child care.

"Not everyone's got the capital to move into an investment of such magnitude," Kelly said.

Republican Rep. Ed Lewis of Moberly was dubious that employers who receive reimbursement from the tax credit would put the extra revenue toward increased salaries unless required to. And Rep. Ann Kelley, a Lamar Republican, said she wanted "to like this bill" but was concerned that there was "no language on decreasing fees for parents" directly.

Galen Bacharier covers Missouri politics & government for the News-Leader. Contact him at gbacharier@news-leader.com or on Twitter @galenbacharier.

This article originally appeared on Springfield News-Leader: How to make daycare affordable? Missouri legislators weigh tax credits