While there are a myriad of factors contributing to supply and demand for childcare, our analysis of the states’ childcare licensing regulations shows that red tape is a major contributor. Regulations represent barriers to entry for new businesses, limit the pool of qualified staff members, and diminish the range of flexible childcare options. If, like Vermont, your state requires preschool teachers to have a bachelor’s degree, a $2,100 tax credit doesn’t offset a month’s expenses.
In Louisiana, the cost of center-based care for an infant is about $10,000 annually (9.1 percent of median income). In Massachusetts, the same services cost roughly $24,000 annually (14.4 percent of median income). Louisiana and Massachusetts are at opposite ends of the Childcare Regulation Index—they represent the wide variety of state-level standards governing child-to-staff ratios, maximum group sizes, minimum educational requirements for center directors and staff, and more. Whereas the maximum CDCTC credit amounts to 20 percent of annual childcare costs in Louisiana, it covers less than nine percent of annual childcare costs in Massachusetts (for those using center-based care for infants).
Tax credits are one way to help families in a financially strained season of life. Rather than direct transfers in the form of a “baby bonus,” credits help families keep more of their money when tax season comes around. However, the state regulatory regime surrounding childcare severely limits how far these savings go.
Matching with trusted childcare providers is an important task for parents, and doing so successfully can help enable families to grow. Recent research by the Archbridge Institute affiliates suggests that less red tape on childcare is one element of economic freedom that improves Americans’ ability to find work-family compatibility and achieve their family size goals. Childcare markets in economically free states are more dynamic in response to regional variation and parents’ needs.
If tax credits are meant to actually move the needle on decisions to enter the labor market or have another child, they would benefit from simultaneous efforts to widen the range of licensed childcare settings and increase competition to better meet parents’ needs.
Continue reading at The Livingston Parish News.
Edward Timmons, PhD, is Vice President of Policy at the Archbridge Institute. He leads the institute's economic policy strategy, identifying focus areas and disseminating work to key stakeholders and policymakers. His own research focuses on labor economics and regulatory policy; he is regularly asked to provide expert testimony to U.S. states on occupational licensing reform and the practice authority of nurse practitioners. Dr. Timmons received his Ph.D. in economics from Lehigh University and his B.A. in economics and actuarial science from Lebanon Valley College. He publishes a weekly newsletter on Substack with the latest research and policy insights surrounding occupational licensing.
Anna Claire Flowers is a family policy fellow at the Archbridge Institute and lead author of the “State Childcare Regulation Index.” She is a Ph.D. candidate in the Department of Economics at George Mason University and an instructor at the Catholic University of America's Busch School of Business. She studies the impact of economic policies on family formation and family decision-making.
Economics of Flourishing
While there are a myriad of factors contributing to supply and demand for childcare, our analysis of the states’ childcare licensing regulations shows that red tape is a major contributor. Regulations represent barriers to entry for new businesses, limit the pool of qualified staff members, and diminish the range of flexible childcare options. If, like Vermont, your state requires preschool teachers to have a bachelor’s degree, a $2,100 tax credit doesn’t offset a month’s expenses.
In Louisiana, the cost of center-based care for an infant is about $10,000 annually (9.1 percent of median income). In Massachusetts, the same services cost roughly $24,000 annually (14.4 percent of median income). Louisiana and Massachusetts are at opposite ends of the Childcare Regulation Index—they represent the wide variety of state-level standards governing child-to-staff ratios, maximum group sizes, minimum educational requirements for center directors and staff, and more. Whereas the maximum CDCTC credit amounts to 20 percent of annual childcare costs in Louisiana, it covers less than nine percent of annual childcare costs in Massachusetts (for those using center-based care for infants).
Tax credits are one way to help families in a financially strained season of life. Rather than direct transfers in the form of a “baby bonus,” credits help families keep more of their money when tax season comes around. However, the state regulatory regime surrounding childcare severely limits how far these savings go.
Matching with trusted childcare providers is an important task for parents, and doing so successfully can help enable families to grow. Recent research by the Archbridge Institute affiliates suggests that less red tape on childcare is one element of economic freedom that improves Americans’ ability to find work-family compatibility and achieve their family size goals. Childcare markets in economically free states are more dynamic in response to regional variation and parents’ needs.
If tax credits are meant to actually move the needle on decisions to enter the labor market or have another child, they would benefit from simultaneous efforts to widen the range of licensed childcare settings and increase competition to better meet parents’ needs.
Continue reading at The Livingston Parish News.
Edward Timmons
Edward Timmons, PhD, is Vice President of Policy at the Archbridge Institute. He leads the institute's economic policy strategy, identifying focus areas and disseminating work to key stakeholders and policymakers. His own research focuses on labor economics and regulatory policy; he is regularly asked to provide expert testimony to U.S. states on occupational licensing reform and the practice authority of nurse practitioners. Dr. Timmons received his Ph.D. in economics from Lehigh University and his B.A. in economics and actuarial science from Lebanon Valley College. He publishes a weekly newsletter on Substack with the latest research and policy insights surrounding occupational licensing.
Anna Claire Flowers
Anna Claire Flowers is a family policy fellow at the Archbridge Institute and lead author of the “State Childcare Regulation Index.” She is a Ph.D. candidate in the Department of Economics at George Mason University and an instructor at the Catholic University of America's Busch School of Business. She studies the impact of economic policies on family formation and family decision-making.
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