Proposed tax credit could ease burden on Michigan families, child care providers

Michigan has made meaningful strides in helping struggling child care providers keep their doors open, but these facilities and the working parents that depend on them still need more support.

That is according to early childhood education experts and business leaders who testified about the condition of the state’s child care system before the Michigan Senate Housing and Human Services Committee on Oct. 17. Their remarks acknowledged that there’s no one perfect solution for the child care crisis affecting Michigan and the rest of the country, but they said a Senate bill to create a Working Parent Tax Credit would be a good place to start.

Senate Bill 838, sponsored by Democratic Sen. Kristen McDonald Rivet of Bay City, aims to provide a tax credit for low-income working families with children aged 3 or younger to help them pay for child care. The proposed Working Parent Tax Credit would be offered based on the same eligibility requirements as the Earned Income Tax Credit, which include a taxpayer’s filing status, number of children, and disability status. The credit would be paid out monthly for a total of $5,500 per young child per family each year.

The October Senate committee hearing was the first related to a package of bills Democratic legislators introduced earlier this year aimed at relieving some of the financial hardships of families and child care providers in the state.

Taunya Sims is a home-based provider in Lansing with almost 30 years of experience in the child care field. Home-based facilities like hers are important in providing services to families with nontraditional work hours, but, she said, it’s gotten harder to pay her three full-time staff members a living wage.

“I open my doors at 3:25 a.m., and my last child leaves our program at almost 11 o’clock at night because we have to provide care for the working families,” Sims said during the hearing. “Our goal is to continue to provide this care for these families, but we need extra funding to continue to do that so that parents can work and provide for their families.”

According to a press release from McDonald Rivet’s office, Michigan has lost 40% of its child care providers in the last decade, and the remaining centers often have long waiting lists that exceed two years.

“I love what I do. I chose this, and I would choose it all over again,” Sims said. “We just need a little help to help with sustainability. We have good providers that are closing their doors.”

In June, a coalition of Michigan’s businesses, faith institutions and nonprofit communities sent a letter to Gov. Gretchen Whitmer and legislative leaders advocating for the passage of the Working Parents Tax Credit, stating that it would give a boost to the state’s child care industry and overall economy. A 2022 Business Leaders for Michigan report reveals the state ranks 39th in the nation in workforce participation. Those who testified during the October Senate hearing noted that the lack of accessible, reliable child care is among the top reasons workers leave the workforce or choose not to enter it altogether.

The proposed tax credit would require an investment of $1.5 billion in state funding, but a 2023 study shows that the state is losing almost $3 billion annually due to employee turnover and absenteeism caused by inadequate child care options.

“There’s no cheap way of fixing child care at scale,” Lou Glazer, the president of Michigan Future, Inc., said. “There’s just too many kids, and the income gap is too great to be able to do this without making new, big investments.”

In recent years, the Whitmer administration has created additional programs and funding opportunities in an attempt to alleviate the burden on the child care industry. These initiatives include: the Great Start Readiness program, a state-funded preschool program that became available to all Michigan 4-year-old’s this year; the MI Tri-Share program, which allows eligible employees, employers and the state to equally split the cost of child care; and the Child Development and Care program, which offers subsidies to pay for for child care services.

There’s an opportunity to reach more children with the proposed tax credit than with current programs, said Angela Rincones, a program manager for The Source, a West Michigan organization devoted to finding housing, transportation and child care solutions for workers. The child care subsidy reaches 30,000 children, and MI Tri-Share reaches 600, but the proposed tax credit could potentially reach 250,000 children in Michigan, she reported.

Rincones estimates there are roughly 100,000 people throughout West Michigan alone waiting to get back into the workforce who are held back by problems with child care.

“The ripple effect of putting extra dollars into the hands of working families will be significant to their household and for our economy here in Michigan,” Rincones said.