The Expanded Child Tax Credit Will Help Fix the Broken Child Care System | Opinion

We were facing a child care crisis in the U.S. before the pandemic. It became more glaring in the past year, when, due to lockdowns and school closures it created a further crippling blow for the economy. Women were forced to leave the workforce in droves. Without action on child care, parents with caregiving responsibilities will be unable to rejoin the workforce and our economic recovery will be stalled.

The Florida Policy Institute found that making child care more accessible and affordable is critical to economic recovery. This is true across the country. Parents are a large proportion of the workforce. In the context of a global workers shortage, we need to ensure they are able to work and for that, they need affordable child care.

The Enhanced Child Tax Credit, effectively a tax cut for parents, is a major step toward solving the child care crisis we currently face in America. On July 15, families received payments of $300 for each child under 6, and $250 for children ages 6 to 17. It gives families the flexibility to use more of their incomes by an amount worth about half of the average annual cost of child care per child, in the way that best suits their families, and for many parents that is child care.

As a business leader, I am concerned that mothers are being left out of the economic recovery. Our business performance is dependent on their contribution, and they need to be able to work if they choose to. In June, the country added 850,000 jobs, the biggest one-month gain since last summer, yet women's unemployment rate actually increased to 5.5 percent in June from 5.4 percent in May. Last month, 148,000 women re-entered the workforce, who either started to work or are actively job-seeking, but just 3 percent actually have a job, compared to 88 percent of men. In other words, women have been penalized for leaving the workforce because of caregiving responsibilities.

Yet the child care market cannot be entirely market-driven because parents cannot always pay more for better care. By giving parents the ability to spend more of their income, through enhanced tax credits, we solve the problem that the child care market is capped by what parents can afford to pay, which is often insufficient for high quality programs to survive. I set up the non-profit Early Learning Ventures (ELV) in 2008 to help make child care business models more efficient. It has impacted over 40,000 children, allowing programs to save over $22 per child and refocus their budgets on care not administration. But efficiency alone is not enough.

Vice President Kamala Harris visits children
Vice President Kamala Harris visits the early childhood education center, CentroNía, in Washington, D.C., on June 11, 2021. JIM WATSON/AFP via Getty Images

ELV works with hundreds of market-based child care providers like Frank Omir, owner of Little Angels and Creative Learning Academy located in Aurora, Colo. Before COVID, he was at 100 percent enrollment. Now, he is currently only at 60 percent. He believes the tax credit will help the families he serves pay for child care and will motivate parents to return to work and enroll their children in child care. Increasing enrollment will drive up revenues in the child care industry to more sustainable levels, which will in turn make care more affordable for families.

In addition, the enhanced tax credit will enable a level of demand that will give parents more options and reward providers who deliver better programs. Tristan, a parent at ELV in the Denver metro area said the payments, "Will not only help off-set the cost that we have to set aside every month for child care, but will also make it easier for us to keep our son in the program we have currently chosen for him, or move him to a new program in the future, if necessary."

The Child Tax Credit will help parents and child care providers alike. It will also help children and the economy. To be sure, the responsibility of child care ultimately rests on parents. But children are our future employees, and we all benefit when the next-generation is well-educated. Boston children who were awarded lottery-allocated pre-K places were 18 percent more likely to enter college on time. They were more likely to graduate from high school, scored more highly on average on the SAT and were less likely to be incarcerated while in high school.

Ultimately, inaccessible child care damages the economy, now and in the future. Arguments can and have been made for a wide variety of policies, from paid family leave, which is an important part of solving the child care crisis, to many models of subsidized early care and education, including pre-K. The Enhanced Child Tax Credit, which is now available for tax year 2021 only, is an excellent starting point. As we see the success of the Child Tax Credit in the coming weeks and months, I hope that President Joe Biden and Congress will consider my call to make it permanent and support hardworking American families and future generations' development.

David Merage is founder of Consolidated Investment Group (CIG) and co-founder of the David & Laura Merage Foundation, who are currently running the #CareForAllChildren campaign.

The views expressed in this article are the writer's own.