The end is in sight for the first year of the legislative biennium in Montpelier, with May 6 as a likely last day. The good news is that so far there have been no new taxes or fees enacted.
Gov. Phil Scott has made it clear he won’t approve any new fees or taxes. But 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 being pushed by VPIRG and a few other advocacy groups. The bill 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 nearly 1 percent tax on all employees in the state. The original bill called for a 50-50 contribution from employees and all employers. The bill we received from the House General Committee removed the employer contribution, at least for now.
The concept is to use $70 million raised by the tax to create a family leave insurance fund to provide 12 weeks of paid leave every year to qualifying employees to care for a newborn or for sick family members, including siblings and grandparents.
While this is a noble goal, there are some serious issues. Employees may pay this tax during their entire working careers and never get a benefit from it, which doesn’t seem right. Many employers already offer paid family leave, in some cases more generous than what’s proposed. Why should those employees pay for something they already get? We have no idea what the participation rate would be and no idea of what the replacement employee costs will be for employers, including the state and local school districts. We have shaky estimates on the administrative costs to the state to operate the program, which will be at least $4 million per year. Too many unanswered questions.
I’ve proposed an alternative to let all employees voluntarily establish personal family leave accounts to be administered by an outside financial institution. Employers would receive tax credits or deductions for matching contributions they make into their employee accounts, much like a 401K. If an employee doesn’t use their personal account, they’d receive it as a lump sum upon their retirement.
There’s a big difference between a mandatory tax and a voluntary contribution program. If advocates of this plan really want to see a paid leave program, I urge them to consider the likelihood of a gubernatorial veto.