Gov. Phil Scott has made it clear he won’t approve any new fees or taxes. There’s a bill slowly making its way through the legislature that may force him to use his veto authority, probably next year. H.196 is the paid family leave bill, which came to our Ways and Means Committee after being passed by the House General, Housing and Military Affairs Committee on a 6-4-1 vote.
The bill proposes to levy a payroll tax henceforth on all employees in the state to finance a $17 million family leave insurance fund. The version we received called for up to 12 weeks of paid leave every year to qualified employees who care for a newborn or for sick family members, including siblings and grandparents.
Federal and state laws now guarantee up to 12 weeks of unpaid leave for businesses with 10 or more employees. The proposal, as we received it, would provide 100 percent of a person’s average wages, up to a maximum of $1,040 a week. All workers would pay a .91 percent payroll tax.
Our committee trimmed it down to a .14 payroll tax with six weeks of paid leave at 80 percent of average wages, or $832 per week. Last Friday, the bill passed out of our committee on a 7-4 vote. I was one of two Democrats to vote against it. Although I believe paid leave is a great thing to have, I was unable to support a new mandatory payroll tax on all working Vermonters.
We’d be asking hundreds of thousands of workers to pay the tax for the rest of their working lives to provide a benefit for fewer than 1,700 people each year. Most of the people who would pay into the fund would never receive any benefit from it.
Thousands of workers already receive some form of paid leave, benefits that in some cases are better than what H.196 proposes. Would those private benefits vanish in lieu of the state system?
Low-income workers would be subsidizing paid leave for people making up to $150,000 a year. The benefit, based on an individual’s average yearly wages, would also be a proportionate disadvantage to lower paid workers.
There are no estimates on what replacement employee costs might be for employers, including the State of Vermont and local towns and school districts. Also, administrative costs to the state to operate the fund would be at least a few million every year. Finally, how long would it take for the tax rates to increase? Not long, I’d guess.
I proposed an alternative to let all employees voluntarily establish personal family leave accounts. Employers would receive tax credits or deductions for matching contributions they make into their employee’s accounts.
In my opinion, advocates of a paid family leave program would be wise to pursue a voluntary solution rather than a mandatory tax certain to be vetoed by the governor.