ELIZABETHTOWN, PA — Pennsylvania employers could receive significantly larger tax credits for helping workers pay for child care under a proposal highlighted Tuesday by Lt. Gov. Austin Davis during a visit to a Lancaster County child care center.
What This Means for You
- Working parents could see expanded support if more employers help cover child care costs.
- A proposed state tax credit expansion would increase potential employer credits from $150 to as much as $10,000 per employee annually.
- The Shapiro-Davis administration is proposing additional investments in child care worker recruitment and retention.
Davis visited the Elizabethtown Child Care Center alongside state Sen. James Andrew Malone to highlight state efforts aimed at making child care more affordable for families, strengthening the child care workforce, and encouraging businesses to help employees manage child care expenses.
“As I’ve traveled across the Commonwealth, I’ve heard over and over again how child care isn’t just essential for families — it’s essential for employers, too,” Davis said. “The business community recognizes this is a workforce issue because if their employees don’t have access to affordable child care, they can’t work.”
Proposed Tax Credit Expansion
The event focused on Pennsylvania’s Employer Child Care Contribution Tax Credit Program, which provides businesses with state tax credits when they contribute toward qualifying child care and related expenses for employees with children.
Under the current program, employers can claim a tax credit equal to 30% of eligible child care costs they cover for employees, with annual contributions capped at $500 per employee. That means the maximum tax credit currently available is $150 per employee.
Malone has introduced legislation that would substantially expand the program. His proposal would increase the tax credit to 100% of eligible contributions, with employers able to receive credits on contributions of up to $10,000 annually per employee. The program would be capped at $10 million in tax credits each fiscal year.
“The cost of child care is one of the largest burdens on working families in Pennsylvania,” Malone said. “Making it more affordable is crucial for the prosperity of Lancaster families and the health of our state’s economy.”
Administration Highlights Existing Investments
The visit also highlighted broader child care initiatives undertaken by Gov. Josh Shapiro’s administration.
In 2023, Shapiro signed legislation tripling Pennsylvania’s Child Care and Dependent Care Enhancement Tax Credit, a benefit available directly to working parents. According to the administration, the credit provided $136.5 million in tax relief to more than 200,000 Pennsylvania families last year.
The administration also secured $25 million in last year’s bipartisan state budget for recruitment and retention bonuses for child care workers. State officials said more than 4,300 child care providers applied for the funding, resulting in nearly 39,000 workers receiving bonuses of $645.
Child Care Viewed as Workforce Issue
Speakers at Tuesday’s event framed child care as both a family issue and an economic development issue.
“When parents can work, businesses can grow,” said Vanessa Philbert, CEO of Community Action Partnership of Lancaster and board chair of the Lancaster Chamber. “Child care is the bridge that makes both possible, creating stronger families, a more resilient workforce, and healthier communities for generations to come.”
Administration officials said demand for child care workforce funding has exceeded available resources, leading Gov. Shapiro to propose an additional $10 million for recruitment and retention bonuses in the 2026-27 state budget. If approved by lawmakers, total funding for the program would increase to $35 million.
Next Steps
Malone’s proposal to expand the Employer Child Care Contribution Tax Credit would require approval by the Pennsylvania General Assembly and the governor before taking effect.
Meanwhile, the administration’s proposed additional $10 million investment in child care worker bonuses remains under consideration as part of ongoing state budget negotiations.
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