Giving Thought: How to pay your taxes and support early childhood education

Tamara Tormohlen
Giving Thought
Tamara Tormohlen
Steve Mundinger photo

It’s a well-documented truth that early childhood education gives kids a boost in their schooling and their lives. The Colorado General Assembly has acknowledged this truth twice — in 1997 and again in 2018 — with its support of the Child Care Contribution Tax Credit.

By relinquishing tax revenue in order to support child care providers and other services that educate and nurture young children (think after-school programs, teacher training efforts, financial assistance for families who need child care, organizations that provide child care information and referrals, etc.), legislators have agreed that early childhood education is good for Colorado kids, families and communities.

Here’s how the tax credit works. If an individual taxpayer or business contributes $100 to a qualified preschool or child care organization, then that taxpayer receives a $50 credit on his or her tax bill. In other words, the gift ends up costing the taxpayer just $50, but the child care organization receives $100 to put toward salaries, training, supplies or any other priority.

Historically, this incentive has netted around $50 million for providers around the state. That’s a big number, but it’s not nearly enough to resolve this fragile economic sector’s woes. Tuition payments from parents still account for most of the revenue to preschools, but that attendance-based income has taken a big hit during the COVID-19 pandemic.

“This is a service provided mostly by small businesses or nonprofits,” said Bill Jaeger, vice president of early childhood and policy initiatives at Colorado Children’s Campaign. “The pandemic has made it difficult for those providers to make ends meet.”

In some communities, charitable contributions literally keep the doors open for preschools and daycare centers.

By contrast, the K-12 educational sector receives funding according to the number of kids enrolled, regardless of those children’s day-to-day attendance. (K-12 funding has its own problems, but at least the funding stream is more predictable.)

Furthermore, as the overall economy struggles to attract people back to work, the questions faced by families with small children are especially hard to answer. How does the cost of child care stack up against the lost income of the parent who stays home every day with the kids?

“The parents of small children are making really difficult choices about who goes back to work and who doesn’t,” Jaeger added.

Anything we can do to prop up preschools and day care centers in our communities helps both kids and working families. That’s part of the reason for today’s column: to encourage readers to take advantage of this tax incentive and support a qualifying local child care provider or preschool. During the holiday giving season, many locals decide on their charitable giving for the year, and this tax credit is an especially smart tool.

“The importance of this tax credit is greater than ever, given the way the pandemic has jeopardized the child care system,” Jaeger said. By forcing parents and children to stay at home for extended periods of time, the pandemic has also illustrated the importance of child care to a functioning economy.

In November 2020, Colorado voters approved Proposition EE, which raised taxes on cigarettes and vaping products in an effort to fund preschool slots across the state. That money won’t begin flowing until 2023 but when it does, preschool providers will have to scale up, hire teachers, buy supplies and expand their facilities. The cost of doing business will increase for providers in a sector with a host of existing uncertainties that now include labor supply and a stubborn, persistent pandemic.

“Philanthropy and things like this tax credit help child care providers to close the gap,” Jaeger added.

If you aren’t familiar with local child care providers, then you can also direct your donation to an organization like Kids First in Aspen or the Early Childhood Network in Glenwood Springs, which don’t provide child care themselves, but help families find affordable child care options in the valley. Some donors write a check to the Aspen Community Foundation’s Early Childhood Fund, which we use to support early childhood initiatives.

If more Coloradans knew about this nifty tool, then perhaps our preschools and child care centers wouldn’t struggle to survive, and local parents wouldn’t struggle to find available, affordable spaces for their children. So, as you consider your 2021 charitable giving, ask your accountant about the Child Care Contribution Tax Credit.

Who wouldn’t want to pay your taxes while simultaneously helping Colorado kids, families and communities?

Tamara Tormohlen is executive director of the Aspen Community Foundation.