Lawmakers want to create tax credits to incentivize employers to provide child care
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Lawmakers are eyeing tax credits to help businesses provide child care to attract and retain workers.
Both Minority Leader Trey Stewart (R-Aroostook) and Rep. Tavis Hasenfus (D-Readfield) presented proposals to the Taxation Committee on Wednesday to create income tax credits for employer-supported child care, though to slightly varying degrees.
'Lack of affordable childcare affects parents' ability to accept a job, maintain steady employment or reduce the number of hours they can work,' Stewart said. 'This all impacts our economic growth as a state. We can do better on this.'
Stewart's legislation, LD 203, would authorize an annual credit of 50% of the amount spent on child care, or $3,000 per child, whichever is lower.
Hasenfus amended his legislation, LD 1555, to authorize the same amounts. However, Hasenfus' version also has a per business cap of $36,000, which he said is intended to ensure the credit isn't used without end and to give a leg up to small businesses.
'Small businesses in Maine also often struggle to match the larger businesses and the benefits that larger businesses are able to offer,' Hasenfus said.
The bills also differ on how long unused credits could be carried over. Stewart's legislation permits carry over for up to 15 years, whereas Hasenfus' version is only up to five years. Both bills stipulate that the credit would be subject to ongoing legislative review starting in 2030.
While the bill sponsors and members of the public who testified in support of the bills said a lack of affordable and available childcare is an issue across the state, they particularly highlighted the challenges in rural areas.
According to a study from the Bipartisan Policy Center, since 2019, 81 licensed child care providers in Aroostook County have closed, while only 38 providers have opened, resulting in a net loss of care for at least 516 children. There are only 84 licensed providers across the County.
Just in March, a large child care facility in Presque Isle that served 71 children and 20 infants closed, with zero infant care available at any center nearby, said Readfield resident Krysta West, who is the deputy director of the Maine Forest industry Council.
West said members of the council commonly cite the lack of child care as a reason they're unable to attract employees and some have therefore taken it upon themselves to fill that gap. For example, Maine Woods and its parent company, Seven Islands, has begun the process of setting up the 'Little Saplings' child care center in Aroostook County.
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'Making visions such as Little Saplings become a reality requires substantial investment,' West said. 'Although they've stepped up to invest in child care needs, public private partnerships and new policy solutions are desperately needed to ensure that these ventures remain viable.'
States have taken varying approaches to address childcare affordability. New Mexico became the first state to offer free child care to families earning up to 400% of the federal poverty level, or about $124,000 for a family of four. Nearby Massachusetts and Rhode Island use the subsidy approach, providing financial assistance to help families pay for child care programs.
Some do not think tax credits are the solution.
Maura Pillsbury, tax policy analyst for the progressive Maine Center for Economic Policy, argued the state should instead reinforce and build on what it's already done — investments that lawmakers are also currently weighing whether to reverse at the request of the governor to help fill the budget deficit.
In 2021, Maine started providing $200 stipends per child care worker to help alleviate worker shortages during the height of the pandemic.
Those monthly stipends doubled as part of the $59 million allocation to overhaul child care in the last biennial budget, spearheaded by former Senate President Troy Jackson (D-Aroostook). The package also expanded eligibility for the Child Care Affordability Program, which provides child care subsidies. The Mills administration had initially opposed Jackson's plan because of an expectation that funding for it would be inadequate.
This year, Gov. Janet Mills suggested reversing those recent investments by cutting $30 million for child care worker stipends to bring them back to 2022 levels, among other funding reductions to services such as Head Start.
Pillsbury requested lawmakers instead reject these cuts, arguing tax breaks for businesses are less efficient and equitable than providing direct subsidies.
'If we want to attract and retain more people in a career that prepares our youngest residents for success and gives workers in every corner of our state the chance to stay in their jobs, we must do better by them,' Pillsbury said.
Questions raised by Rep. Shelley Rudnicki (R-Fairfield) suggested she may be opposed to the tax credit approach but for different reasons. 'Why should I and other seniors like me, who had to pay for our own childcare and didn't get these credits, now have to pay?' Rudnicki asked.
Referring to home day care options, Rudnicki also questioned whether it would be more effective to loosen child care regulations instead.
'Is this really the best way to go about this?'
West argued it is. 'It gives employers flexibility to pursue the needs of their local community,' she responded.
Rudnicki similarly suggested licensing changes during the hearing for a bill to increase the state's child tax credit. That plan from Senate President Mattie Daughtry (D-Brunswick) to double the state's child tax credit for children under six years old would be paid for by phasing out the benefit for the state's highest earners.
During that hearing, child care providers argued that loosening restrictions would damage the quality of the care and that liability insurance would likely refuse to insure providers.
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