Federal tax incentives should be redirected from parents (demand-side) to childcare workers (supply-side) through mechanisms like a wage tax exclusion.
Private equity's involvement in childcare is primarily extractive, generating high profits through financial engineering and market consolidation rather than by improving service or expanding access.
Increasing demand-side subsidies for parents is a flawed strategy that would likely attract more private equity investment without solving the sector's underlying supply and labor problems.
The U.S. childcare market is fundamentally broken, characterized by a stark divide between highly profitable PE-backed chains and independent providers operating with unsustainable, sub-1% profit margins.
The expiration of federal COVID-19 relief funds has created a critical crisis that necessitates a permanent, structural funding solution for the childcare sector.
Pre-Pandemic
Characterizes the U.S. childcare system as underfunded, with federal spending at ~$500 per child and key parent tax credits not indexed for inflation.
COVID-19 Pandemic
The U.S. government provides a temporary $52.5 billion in support funds to stabilize the childcare sector.
2024
Notes that the national average cost of childcare reached approximately $13,000 as the temporary federal pandemic funds were fully depleted.
Post-Pandemic
Observes that in response to the funding cliff, some cities and states have begun implementing new taxes to fund supply-side support for childcare.
Current Discourse
Proposes a fundamental policy shift with the "child care service provider exclusion," advocating for direct tax benefits to workers instead of parents.
▶The Extractive Nature of Private Equity in ChildcareMay 2026
Shores-Pelican argues that private equity's growing dominance in the childcare market is a primary driver of dysfunction. She claims nine of the ten largest for-profit chains are PE-backed, achieving 15-20% profit margins not by innovation, but through financial engineering, market consolidation, and targeting affluent families, while the rest of the market struggles with less than 1% profitability.
Investors should scrutinize the operational stability of PE-backed childcare chains, as their high employee turnover and history of bankruptcies suggest that high reported profits may mask significant underlying business risks.
▶Advocacy for Supply-Side Tax ReformMay 2026
A central theme is the call for a radical shift in U.S. tax policy for childcare. Shores-Pelican explicitly proposes moving away from parent-side subsidies, which she believes can inflate costs, and instead implementing a "child care service provider exclusion" to make childcare workers' wages exempt from federal income and payroll taxes.
This proposed policy could fundamentally alter the labor economics of the childcare sector by boosting net pay without increasing costs for providers, potentially creating a more stable workforce but facing significant legislative hurdles.
▶The Financial Fragility of Independent ProvidersMay 2026
Shores-Pelican highlights the precarious financial state of the majority of U.S. childcare providers. She notes that with labor consuming 70-80% of budgets and profit margins below 1%, independent centers and family homes are extremely vulnerable, especially after the depletion of $52.5 billion in federal pandemic aid.
The expiration of federal support creates a significant risk of mass closures among independent providers, which could accelerate market consolidation and reduce childcare availability in less profitable areas.
▶Inadequacy of U.S. Government Childcare SupportMay 2026
She contends that the U.S. government's approach to childcare is chronically insufficient. She contrasts the U.S. spending of approximately $500 per child annually with Norway's nearly $30,000, and points out that key federal tax credits for parents are not indexed for inflation, diminishing their value over time.
The policy vacuum at the federal level is prompting some cities and states to experiment with new, localized funding mechanisms, creating a complex and fragmented regulatory landscape for childcare operators.