Outdated tax incentives do little to attract employees, official tells Arkansas lawmakers


In the nearly 30 years since Arkansas passed a law to incentivize businesses to build child care facilities for their employees, none has taken advantage of it, Department of Commerce Chief of Staff Jim Hudson told lawmakers.

As lawmakers prep for the legislative session in January, Hudson told lawmakers during a committee hearing Monday that outdated tax incentives are having minimal effect on helping businesses attract new employees in a tight labor market.

The post-covid-19 economy has given incentives for parents with young children to either search for employers who will let them work from home or look for jobs at places that offer competitive child care benefits. One of the state’s tax incentives the legislature passed in 1993 that provides a sales and use tax refund to businesses that spend money on “construction materials and furnishings” to build a child care facility for its employees has never been used, Hudson said.

“We do have a child care facility incentive,” Hudson told members of the House, Children and Youth Subcommittee. “I can tell you it has been used a grand total of zero times.”

Hudson said the tax incentive is unappealing for businesses because of the liability it could bring and the time, planning and resources it would take away from a company’s core businesses.

Hudson said companies should offer more competitive benefits as child care accessibility has grown and some workers look for more flexibility from their employers for personal time off.

“So, while I might have had an aversion as an employer in the past to offering some things like, you know, paid time off, I can’t choose not to do that now if I actually want to go out and get employees,” Hudson said. “[Fringe] benefits are just as competitive as straight salaries.”

While child care affordability has always been an issue for low- and middle-income families, Hudson said issues of accessibility for parents have become a greater issue in recent years as workers have become more willing to move jobs.

According to a recent study from the Arkansas State Chamber of Commerce, about one-third of working parents changed jobs over child care issues. Child care issues cost Arkansas roughly $800 million a year in lost tax revenue and lost productivity, according to the study.

Geania Dickey, public policy chair at the Arkansas Early Childhood Association mentioned that Louisiana has a more generous suite of child care tax incentives. Dickey said Louisiana has tax credits for providers, workers and employers.

Dickey said the workforce tax credit issue has become more salient as many child care centers, like other employers, have staffing issues.

“I have classrooms closed because they can’t find staff,” Dickey said.

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