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Funding Our Future: Generating State and Local Tax Revenue for Quality Early Care and Education

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Funding Our Future: Generating State and Local Tax Revenue for Quality Early Care and Education provides early childhood leaders with funding strategies for increasing the revenue from state and local sources that can be directed to high-quality early care and education.

The political and policy relevance of early care and education is on the rise. This was clear both during the 2018 gubernatorial races, when many successful candidates declared a commitment to early care and education, and in governors’ budgets, which proposed investments of $2.9 billion in new state funding for early childhood.

While ongoing efforts to improve general appropriations at the federal and state continue to be critical, the scale of currently available resources, particularly to support high-quality child care for infants and toddlers, motivated us to form the Child Care Revenue Work Group. The Work Group is made up of tax experts and seasoned early childhood leaders who aim to identify promising opportunities to generate state and local tax revenue dedicated for early care and education that can help close the significant gap between what is currently available and what is needed.

State and local tax revenue dedicated for early care and education provides a largely untapped approach for early childhood leaders to consider. Noteworthy work has been done, both at the state and local levels, to support quality early care and education through dedicated taxes. These revenues can have a significant impact on long-term goals, as seen in the local children’s taxing districts in Florida or the new approach to corporate and business taxation in Oregon. The pioneers who started this work in states and localities around the country demonstrate early successes in helping to close the extreme funding gap in early care and education. Local and state revenue generation contributes to national momentum. Funding Our Future: Generating State and Local Tax Revenue for Quality Early Care and Education catalogues the “what” of some of these foundational efforts and goes beyond them by introducing potential “next generation” tax policy ideas for consideration.

The recent study from the National Academies of Science, Engineering, and Medicine, Transforming the Financing of Early Care and Education, estimated the total cost of a high-quality, affordable early care and education for families with children from birth to kindergarten. With the national cost coming to at least $140 billion a year, significant new revenue must be identified and invested in early care and education for children from birth to kindergarten. Strides have been made at the federal, state, and local levels for early care and education (e.g., child care, Head Start, Early Head Start, prekindergarten); however, the gap is wide between today’s investment of $29 billion and the $140 billion suggested by the National Academies report for a public-private system that would give all children—regardless of age, family income, race, ethnicity, and geography—access to vital early care and education services and would still be less than the 0.8 percent of Gross Domestic Product (GDP) invested in early care and education by the nations in the Organisation for Economic Co-operation and Development (OECD).

With this in mind, Funding Our Future: Generating State and Local Tax Revenue for Quality Early Care and Education introduces seven state and local tax policy areas for consideration as part of the push for expanded public investment in early care and education.


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