Missouri Legislator Proposes Tax Credits Aimed at Mitigating Child Care ‘Crisis’ Without Help, Child Care Sector is 'Going to Implode'

A Missouri House committee on Tuesday debated legislation that would establish several tax credits designed to improve access to affordable child care and stabilize the industry.

Tax credits are a priority within Gov. Mike Parson’s child care agenda, as he laid out in his State of the State speech last month. 

“What we’re trying to do here is create some stability in the child care market,” said Rep. Brenda Shields, R-St. Joseph, who is sponsoring the bill. She told her colleagues Tuesday that the legislation is needed because the child care market in Missouri is in a state of “crisis.”

A 2021 report from the U.S. Chamber of Commerce Foundation estimated Missouri loses over $1.3 billion annually from accessibility, quality and cost-related hurdles to child care. 

Shields said she’s seen data showing that of the 30% of providers who went out of business during the pandemic, only 3% have returned. 

“I look forward to the day that we can attract businesses to Missouri,” Shields said, “because we can say that we have quality, reliable, affordable childcare for your workforce.”

Over a dozen people testified in support of the bill, including those representing child care providers, state and local chambers of commerce, child advocacy groups and an anti-abortion advocacy group. 

Deidre Anderson, CEO of the Kansas-City based child care nonprofit Early Start, which operates three child care centers, said it is “exhausting to try and operate in this environment.”

“You have people leaving the field on a constant basis simply because the work is exhausting,” she said, “yet the compensation isn’t where it should be.”

Without state action, Anderson said, the child care sector “is just going to implode.” 

There are 1,000 children on the waiting list across her three facilities, Anderson said.

That’s double what she would expect just a few years ago, she said.

But at the same time, seven of her classrooms are empty because of challenges attracting and retaining staff. 

Anderson hopes the tax credits could help providers attract more staff and allow the centers to serve more children.

“It is going to give us some creative opportunities,” she said, “and ways to innovate and expand.”

The proposed legislation includes three kinds of tax credits: For donors to child care facilities, for employers who help pay for employees’ child care and for child care providers. 

Several legislators on the House Families and Children committee Tuesday questioned whether the particular kind of credits would be an efficient use of taxpayer money, and whether the legislation could ensure providers and their staff would benefit. 

The first, called the “Child Care Contribution” tax credit, allows donors to child care providers to receive a credit equal to 75% of a qualifying donation, up to a $200,000 tax credit. 

The provider must use the donation to “promote child care” including by improving facilities, staff salaries or training. The donation could not be made in exchange for care of a child.

An example of this credit would be if a business donated to a provider in exchange for the provider setting aside slots for the children of the business’s employees, Shields said.

“A business could say, ‘I’m going to give you $100,000 to your child care and I want to guarantee that I could have five slots, always in your childcare,’” Shields said. 

“Why would a business give to a child care? Because they want to make sure that they have child care for their employees,” Shields continued.

Rep. Hannah Kelly, R-Mountain Grove, raised concern that only large businesses could afford those donations to secure slots for their employees.

“What about the business that has three employees?” Kelly asked. “We are a diverse state and not everybody’s got the capital to move into an investment of such magnitude.”

Shields said smaller businesses could provide smaller donations. 

“The small mom and pop could also participate by giving a donation,” she said, “they don’t have to give a $200,000 donation, they can give a much smaller donation.”

The second kind of tax credit, called “Employer Provided Child Care Assistance,” is aimed at creating partnerships between businesses whose employees need child care and providers. It would allow employers to receive tax credits equivalent to 30% of qualifying child care expenditures.

Shields said businesses could “partner with child care facilities,” to have an onsite facility, or businesses could offer to pay a portion of employers’ child care. 

The last tax credit allows child care providers to claim a tax credit equal to the provider’s employer withholding tax and up to 30% of a provider’s capital expenditures on costs like expanding or renovating their facilities. 

The hope, Shields said, is the credit would incentivize providers to raise their staff’s salaries.

Providers could “keep all the tax withholdings that they hold out of their employees’ checks, with hopes that they will raise their employees’ salaries,” Shields said, later saying that child care staff can now “make more going to McDonald’s or Burger King than taking care of children.” 

Rep. Ed Lewis, R-Moberly, asked if there is any certainty the money providers would save through the tax credit would go back into the employees’ salaries.

“There’s not a requirement that that has to happen. But that is the expectation, the idea behind it,” Shields said.

Some other states have versions of tax credits related to child care, but none have “put all three of these together,” Shields said. 

Half of states have a dependent care tax credit for parents, according to the public policy nonprofit Committee for Economic Development, and 18 states have a tax credit for employers.

Each of the three proposed Missouri credits is capped at $20 million per calendar year. If the full amount is authorized, the cap for the next year would be increased by $3 million and would need to be used for providers located in a child care desert. 

The fiscal note estimates that in fiscal year 2024, the general revenue cost could reach $47 million, and in each of the two fiscal years following, roughly $70 million. 

Those costs include the tax credits themselves, as well as the administrative costs for the Department of Revenue, Department of Economic Development and Department of Elementary and Secondary Education.

All the programs would expire at the end of 2029.

Clara Bates covers social services and poverty for the Missouri Independent, where this story first appeared.

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