Intrigued by the public discussion of taxes during election times — tax cuts, tax credits, and all that? Tax policy is important any time. A recent paper by Louise Stoney and Anne Mitchell, "Using Tax Credits to Promote High Quality Early Care and Education Services," discusses tax policy in regard to early care and education.

 

Tax credits have been used in a variety of policy areas to encourage increased investments in programs seen as “social goods,” such as clean energy and charitable donations. This paper explores financing strategies for early childhood programs by examining whether carefully crafted individual or business tax credits/deductions could...

The researchers examine a range of tax incentives that have been used in other fields and could serve as models for early care and education finance, such as consumer/individual tax credits and deductions; occupational tax credits and deductions; and investment tax credits, deductions and abatements for firms.

 

The findings suggest several recommendations about how to best structure and use tax credits. Among the key points: cost and stability of credits are critical; tax credits must be well linked to high quality “products,” in this case early childhood programs; if high quality programs are desired, parents must have ways to distinguish them, thereby making public education about quality important; and, for the tax credits to be effective, administration should be simple and infrastructure in place.

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