S.56, legislation that would significantly increase spending on child care worker salaries and related subsidies, and require significant tax increases to pay for this, has been under review in three House committees after passing the Senate.  It is currently in the House Education Committee after having passed through the House Human Services Committee to review primarily the substantive child care policy provisions.  The House Education Committee is reviewing early childhood education provisions that are also in the bill.  Meanwhile, the House Ways and Means Committee is reviewing different tax increases that could be used to pay for the bill.

As passed by the Senate, the bill would cost $39.2 million in FY24 and $114.6 million in FY25. At least $83 million of new revenue would be raised annually through a 0.42% payroll tax on employers, with employers having the option of shifting up to 25% of that on to employees.  Additional revenue would come from sources including eliminating the recently enacted state child tax credit, accounting for nearly $32 million.

The Ways and Means Committee, in contrast, is looking at raising the majority of new revenue to cover the bill by increasing the top corporate tax rate from 9.5% to 10%, and increasing each personal income tax bracket’s rate by 0.5%.  However, it is also considering increasing the EITC, which would offset the personal income tax increase for lower income Vermonters. Combined these proposals would raise about $120 million (with the combined tax increases of almost $135 million offset by a little over $14 million in the EITC increase).

AIV does not support S.56 as it is currently evolving.  The costs of the bill are enormous, especially compared to the very small projected impact of the bill on workforce availability owing to child care challenges.  It’s programmatic approach of increasing salaries and subsidies appears inefficient and likely lead to reinforcing cycles of cost inflation.  We have recommended looking at more focused support, especially for employers who provide onsite care or employee subsidies directly.  It is also critical to look at overly burdensome regulatory requirements adopted in recent years that have driven up the cost of child care and constrained the sector’s available workers.

AIV will remain engaged on the bill, especially as the financing discussion continues in the Ways and Means Committee.  Employers interested in more information or opportunities to engage with legislators on this issue are encouraged to contact us at info@aivt.org.