A New Child Care Tax?

Date: August 15, 2023

Will the state legislature make small business pick up funding slack?

“The Fair Start for Kids Act will get parents back to work, get our economy up and running, and give kids a fair start in life with quality childcare and early learning services,” boasted Gov. Jay Inslee when he signed Senate Bill 5237 into law two years ago.

“But that bill,” reported the Yakima Herald-Republic, “primarily addressed the quality of care, rather than access. Many parents still could not afford to pay their copayments. And the subsidies providers were receiving didn’t cover the full cost of care, leaving many struggling to make ends meet. Plus, the state had already been suffering from an undersupply of licensed capacity.”

Indeed. As reported by The Seattle Times, “Licensed child care facilities routinely have waitlists up to a year. This problem, developed long before the pandemic, has persisted because child care is a tough business, returning low pay for long hours and high demands. Home-based providers are especially prone to quit the business or retire, and the lost spots are hard to replace because of startup costs and licensing requirements.”

As the headline on a Public News Service story put it, With Industry in Crisis, WA Addresses Child Care Woes. Quoting Ryan Pricco, director of policy and advocacy with Child Care Aware of Washington, the story notes, “the next challenge for Washington and the rest of the country is ensuring that workers in the industry are properly compensated. ‘We don’t have that in place right now and until we get that in place, these other investments and other policies that we’ve made progress on will never realize their full potential until we do so.’”

Home-based providers quitting? Proper compensation?

If small-business owners are feeling the familiar hand of state government slowly reaching into their pockets, a little background is in order.

State funds and the federal government’s pandemic contributions to states were the sources of money at the beginning, but when The Fair Start for Kids Act passed two years ago, its more permanent source of revenue was left up to another legislative bill to handle, which it did by slapping a 7% capital gains tax on profits above $250,000 in sales of investments. A challenge to that bill was settled this year by the Washington Supreme Court, which upheld the bill’s legality.

Will a new tax be necessary? Small business owners, the most practical and logical of all people, will no doubt agree with much of what Rep. Joe Schmick had to say in the Yakima Herald-Republic article.

“’In my mind, there’s four underlying issues,’ said Schmick of child care. ‘We’ve overregulated the day cares out of business. We’ve then required a master’s degree to run a day care. We then allowed unionization of the workers. And the last one is now we have a much higher minimum wage. The bill that was passed, we didn’t delve into what I would call those core issues. We just threw a whole bunch more money at it thinking that money is going to fix this. I don’t see this helping much at all.’”

In other words, let’s try fixing all of that before levying another tax. But not all share NFIB’s concern. One business group has now joined child care advocates on a bus tour around the state to sound the alarm and, it is suspected, gear up support for some kind of legislative proposal to (once again) tax Main Street.

Washington state already has one of the more generous paid family and medical leave laws in the nation, allowing recipients up to 12 weeks of paid time off, a program requiring all businesses to file quarterly paperwork with the Employment Security Department. For now, businesses with fewer than 50 employees don’t have to pay the employer’s part of the premium costs, but no one can be faulted for suspecting that will not last long.

What will the cost of throwing child care funding into the mix be? There was a $500,000 appropriation in the budget this year to study how our state can get to a fully funded, universal child care system.

Come the opening of the 2024 session of the Washington State Legislature, NFIB will be closely monitoring all child care and paid leave legislation introduced. We ask that our members keep an eye out for the Action Alerts we send them.

If you’d like to share your thoughts on these issues, send an email to NFIB State Director Patrick Connor at [email protected].

Photo courtesy of the Office of Evaluation Services of the U.S. General Services Administration.

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