July 18, 2014 — Child care is expensive. Hands down, if you are a parent, you know that one of the most significant costs that you will bare right from the get-go is the cost of child care. And yet parents want and need access to high quality child care that supports their children’s learning and development while they earn money to support their families. For Michigan’s struggling families, high quality child care can help their kids start kindergarten with the skill set they need to succeed in school. As for the child care industry, they struggle to pay for costly quality improvements since many quality indicators require ongoing costs to maintain.
One strategy to increase the quality of and access to child care is through tax credits. Louisiana provides a fabulous tax credit model built upon its Quality Rating and Improvement System (QRIS) that provides financial incentives that help families access higher quality child care and encourages providers to increase the quality of their programs. Called the School Readiness Tax Credit, the Louisiana model supports and bolsters the child care system by providing refundable tax credits, which allows taxpayers to receive a check for the amount of the credit if they have no tax obligation. This is particularly important for nonprofit child care providers and for low-income families who benefit the most from these credits.
Louisiana’s School Readiness Tax credits are as follows:
- Families can receive a tax credit for kids enrolled in a child care program that has a rating of at least two out of five stars in the QRIS. The tax credit increases in value as families access higher-rated child care programs.
- Child care providers who participate in the QRIS are eligible for a tax credit based on the number of stars they earn and the number of children they serve who are subsidized by their state’s child care subsidy system or are in foster care.
- Child care teachers and directors are eligible to receive a tax credit if they teach in a child care program that participates in the QRIS, and is based on the level of education the individual has attained.
- Businesses that provide financial support to child care programs that participate in the QRIS – either through donations to support their infrastructure or to support their employees’ child care – are eligible for a credit with its value based on the star rating of the child care program. Businesses can also receive a credit for donations made to child care resource and referral agencies.
Michigan is well-poised to implement a child care tax credit system similar to the Louisiana model, with our QRIS known as Great Start to Quality already in place. Each four of these pieces would provide significant benefits to families, child care providers, child care teachers and directors, and our local businesses to support families while ensuring our economy can continue to rebuild. Keep your eyes out for a series of blogs focused on each component of Louisiana’s School Readiness Tax Credit and how a similar system could benefit Michigan children and families.
Learn more about opportunities through child care tax credits in our latest Issues for Michigan’s Children publication.