Research evidence supports more targeted childcare assistance, not universal subsidies
When the Senate DFL introduced a bill to expand the child and dependent care credit — SF 09, American Experiment provided written testimony opposing the bill. In the testimony, we argued that the high and rising childcare prices are a result of government action. Therefore, government spending would not lower costs but would merely transfer high costs onto taxpayers.
We also argued that tax credits are especially problematic because they would complicate the tax code. Moreover, tax credits do not assist low-income parents who usually don’t use paid childcare, but instead rely on Family, Friends, and Neighbor care. Tax credits would also reduce the proportion of Minnesotans subject to individual income tax. This would make our tax system more progressive than it is now, and even more reliant on a tiny segment of high-income earners.
When they introduced their Omnibus tax bill, the House DFL excluded the bill. However, the Senate DFL put out their omnibus tax bill yesterday, and it includes the provisions in SF 09 to greatly expand eligibility for the child and dependent care credit — which would be named great start childcare and dependent care credit — to households with incomes over $200,000 and make it even more generous, providing up to $12,500 in tax credits per family (depending on the number and age of eligible dependants).
At American Experiment, we maintain our opposition to the Great Start Childcare and Dependent Care Credit, for reasons already outlined. But we would also like to remind lawmakers that research evidence that supports childcare assistance, generally does not endorse universal subsidies. Instead, a lot of public spending efforts that have produced significant outcomes have mostly targeted low-income and disadvantaged children — the opposite of what this proposal intends to do.
The research on childcare programs
When Gov. Walz introduced his proposal to provide families with thousands in tax credits as well as expand spending on childcare assistance, he touted that such investments in childcare would bring $12 per $1 invested. But as I wrote in an Op-ed published by the Duluth News Tribune, the research that Walz was citing,
is about a small and intensive program, called the Perry School Program, that was targeted at disadvantaged African American children at risk of failing school in the 1960s. In addition to providing high-quality preschool education, the program provided home visits.
The same is true about other programs with similar results.
Other similarly cited programs — like the Abecedarian program in North Carolina, implemented in the 1970s, and the Child-Parent Centers (CPC) in Chicago — follow the same formula. Both programs are targeted at disadvantaged African American children, and, in addition to preschool, they involve parents and provide home visits as well as other things like health screenings and speech therapy.
Looking at more universal programs like Headstart, the results range from very modest to negative. And when separated by groups, even in those universal programs, poorer children tend to reap bigger gains from the programs than do fellow participants.
Targeted assistance is more effective
With limited resources and unlimited wants, lawmakers must choose the most productive use of taxpayer funds. And to justify spending money on childcare, Walz and other advocates have maintained that spending on childcare will pay for itself by improving child outcomes. Research indicates, however, that for the average child, access to childcare has no significant impact on child outcomes.
This is because generally, child outcomes are more dependent on the home environment than on access to childcare.
A study by the National Institute of Child Health and Human Development, for example, found that children develop better when they have a good home environment. Specifically, the research found that factors like household income, parental level of education, and whether it’s led by a single parent or two parents are better determinants of how well a child turns out in his or her early years. Other factors like the mother’s personality and sensitivity to her children also significantly affect kids’ development.
For disadvantaged children, access to high-quality childcare can have some impact on outcomes. This is because
high quality childcare can mitigate the effects of negative home experiences by providing a more nurturing and conducive learning environment, leading to such substantial gains that we see in these targeted programs
Nothing short of regulatory reform will lower childcare costs. However, if assistance must be provided, research suggests that it be targeted toward low-income and disadvantaged children because that is where it will do the most good.
Providing thousands of dollars in tax credits to high-income households runs counter to that idea, and would not be a productive use of taxpayer funds.