As federal progress on expanding the child tax credit and paid family leave stalls, states are urging private employers to help close a critical gap for working parents: child care.
The National Conference of State Legislatures reports that 17 states offer tax credits to employers providing child care services. These states include Arkansas, Colorado, and Illinois, among others.
Eric Syverson, senior policy specialist at the National Conference of State Legislatures, noted a growing bipartisan consensus around using tax codes to support parents needing child care services.
“States have realized the federal government is considering increasing tax credits, and they could benefit by enacting their own,” Syverson said.
However, large corporations are the primary beneficiaries due to the high costs of establishing child care facilities, and many businesses remain unaware of the available tax credits.
Related: More companies open on-site child care to help employees juggle parenting and jobs
According to the Bureau of Labor Statistics, only 12 percent of workers had access to employer-provided child care benefits in 2023. Jessica Chang, co-founder and CEO of Upwards, a child care marketplace, helps businesses and government entities create child care benefits programs for employees.
Upwards collaborates with employers by matching employees with local child care providers, offering a more feasible option than building on-site facilities. The company uses employee data to customize benefits, such as recommending backup care credits for non-traditional hours.
“By partnering with Upwards, we have helped our [employees] find trusted providers who accommodate varying work schedules,” said Susan Loveday, VP of Human Resources at Dollywood Parks and Resorts. “We also provide a monthly stipend to those whose children are cared for by an Upwards provider.”
Federal action on child care policies has been slow. The Senate recently voted against a larger child tax credit, and federal law doesn’t guarantee paid days off for parental, medical, or family caregiving responsibilities.
In 2022, Congress passed the CHIPS and Science Act, allocating $50 billion to companies expanding semiconductor manufacturing and offering child care to employees.
President Joe Biden stated during a debate, “We should significantly increase the child care tax credit and encourage businesses to have child care facilities.”
Related: D.C. experimented with giving child care workers big raises. The project may not last
The Heritage Foundation, in its Project 2025, advocates for Congress to encourage on-site employee child care, citing its benefits for the parent-child bond.
Still, some experts argue that employer-sponsored child care is a temporary and inequitable solution. Elliot Haspel, a senior fellow at Capita, believes a permanent public funding stream is necessary. He points to states like Vermont, which fund child care through a payroll tax.
Casey Peeks, senior director of early childhood policy at CAP, believes businesses should advocate for child care funding, noting the annual $122 billion cost of the crisis to the U.S. in lost earnings and productivity.
The Federal Reserve Bank of Chicago reports that despite rising child care costs, workers earn an average of $14.60 per hour, leading to a supply shortage due to low pay and high responsibility.
Anna Lovejoy, director of early childhood policy at CAP, acknowledges state efforts but raises concerns about tying child care to employment, which can create equity issues.
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