Payroll Tax to Fund Child Care

Dedicated Funding Streams & Financing

Taxes

In 2023, the Vermont General Assembly passed House Bill 217, enacting a 0.44% payroll tax to fund new early childhood investments. In its first fiscal year, the bill is funded through a combination of one-time funds and an increase in the base appropriation to the child care subsidy program from the state’s general fund. In future years, the program will be funded by an increased base budget plus revenue from the new payroll tax that will be appropriated to a dedicated fund. The payroll tax will apply to employees and self-employed individuals. For employees, the tax will be 0.44% and will be split between employer and employee, with 0.33% paid by the employer and 0.11% paid by the employee. Self-employed individuals will pay only the employee share of 0.11%.

Learn More: Inside the winning fight for affordable child care in Vermont

Source:
Vermont State Legislature. (2023). H-0217 As Passed by Both House and Senate.

Vermont Legislative Joint Fiscal Office. (2023). Fiscal Note: H.217 (Act 76) – An act relating to child care, early education, workers’ compensation, and unemployment insurance.

Connections to Key Early Learning Study at Harvard (ELS@H) Findings:

Stable, robust funding is essential to expanding and improving early education. Unlike K-12 education, early education has historically been supported through a fragmented – and largely insufficient – set of federal, state, and local funds. Research suggests there is a need for more accessible, affordable, and high-quality approach to early education across the mixed-delivery system – and for better financial and professional supports for the educators who serve children and families each day; creating dedicated funding streams can therefore help states and cities address these needs and achieve these goals.

Findings from the Early Learning Study at Harvard (ELS@H) show:

Families rely on a range of formal (e.g., Head Start, center-based care, public pre-K) and more informal (e.g., home-based, relative care) early education settings; when choosing a setting for their child, families balance many logistical constraints and personal preferences.
But for many families – and especially low- and middle-income families – early education choices remain tightly constrained due to issues of affordability and supply.
No one early education setting type is inherently of higher quality than another; children develop and learn well in every setting type, and in the study, all setting types showed room to grow in quality.
Early educators play a critical role in supporting the well-being of young children and families across setting types.
Yet their pay, benefits, and other professional supports are often inadequate in light of the job demands and their cost of living.

Learn More about ELS@H Findings