State Loses $1.5 Billion in Taxes Because Parents Aren’t Working

Washington state is losing $1.5 billion in taxes because many parents have stopped working and are taking care of their children at home, according to a new report.
Child care costs have reached record highs in the period of inflation that arrived after the COVID-19 pandemic. According to the U.S. Census Bureau, in 2021, child care ranged from $4,810 a year for a school-age child to $15,417 for infant care, depending on the location.
In Washington, the number reaches $1,050 a month for parents to find care for just one child, making it one of the most expensive states to have and raise a child, according to child care marketplace Winnie.
“Washington residents in this regard are facing the concerns that many other parents are in states across the country,” Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek. “Child care costs have increased substantially over the past two decades, leaving some parents to drop out of the workforce because that’s actually the more financially viable option for them.”
Those costs are making a significant impact in Washington, where the lost family income, turnover and absenteeism was estimated to cost $6.9 billion in 2023, according to a report from public policy research firm ECOnorthwest.
When split among all 7.95 million Washington residents, that would amount to a cost of $870 each, and a gross state product loss of $6 billion. In all, looking at lost state, federal and local taxes, Washington parents not working because of child care needs cost nearly $1.5 billion, the report found.
Many parents found the high costs of child care increased the likelihood of quitting or being fired from their jobs.
“The high cost of childcare has become a determining factor for spouses removing themselves from the workforce,” Kevin Thompson, a finance expert and founder and CEO of 9i Capital Group, told Newsweek. “Families have to determine if it’s economically feasible for both of them to stay in the workforce while providing child care.”
In the report, which surveyed 600 residents who take care of children, 74 percent of parents of children 12 or younger said the cost, quality or availability of child care presented significant challenges to their ability to work, and they estimated missing five working days per year because of child care disruptions.
Forty percent said they had quit or were fired from a job because of child care disruptions, and the majority, 62 percent, missed at least one day of work because of child care issues in the last three months.
“People are missing work due to child care issues and are quite often fired from their jobs due to absenteeism,” Thompson said. “Economically, this is a substantial loss in regard to taxation and revenue from state local governments.”
For many, the costs are less of a problem than simply finding care, Beene said.
“Many child care facilities don’t have capacity for the demand of their area, and some smaller entities that used to assist with care have shut down either due to financial pitfalls or liability concerns,” Beene said. “All of these elements combine to make the perfect storm for parents, children and employers that makes everyone lose.”
Beene said the issues could indicate it’s time for states to look at potentially expanding child care, but that could be difficult, as well.
“When children are involved, rightfully, there’s a great deal of concern about the economic and legal issues that can come up with any form of care,” Beene said. “Government can assist, but it’s going to take some smart, savvy decision-making to not have it backfire on them.”