Do the Feds Need to Raise Taxes to Fund a Paid Sick Leave Program? (S. 786)

What is S. 786?

(Updated March 15, 2018)

This bill would entitle every person to a family and medical leave insurance (FMLI) benefit payment for up to one year after they meet certain qualifications to compensate them for up to 60 caregiving days over the course of that year. To accomplish this, the Office of Paid Family and Medical Leave would be established within the Social Security Administration.

Any person who meets the following criteria would be qualified for a benefit payment if they:

• Are insured for disability insurance benefits under the Social Security Act when they have applied for FMLI benefits;

• Have earned income from work during the 12 months before the application was filed;

• Have filed an application for a FMLI benefit;

• Were engaged in qualified caregiving 90 days before the application was filed, or anticipate doing so in the 30 days after.

A formula would be created to determine an individual’s monthly FMLI benefit payment, which also establish the minimum and maximum monthly benefit amounts. Workers could get up to 12 weeks of partial income when taking time off for dealing with their own health problems, or those of their spouse or child. They could receive up to two-thirds of their monthly wages up to a capped amount.

This bill would also contain a requirement that these benefit payments be coordinated with temporary disability insurance and any state, local, or combined family leave insurance program.

Funds from the Social Security Trust Fund could not be used or appropriated to make FMLI benefit payments. Instead, the Federal Family and Medical Leave Insurance Trust Fund would be set up in the Treasury to facilitate FMLI benefit payments.

The Internal Revenue Code would be amended to impose a tax on every individual and employer, all self-employment income, plus railroad employees, their representatives, and employers to finance the FMLI benefits. Taxes would be imposed on both employers and employees at a rate of 0.2 percent on the wages of each. This would lead to taxes of $72 per year for workers at the median weekly wage, or $227 per year for the highest earners according to the bill's proponents.

Argument in favor

Ensuring that working families don’t suffer economic hardship because one or more of a family’s earners have to take time off of work to tend to the health needs of their spouse or child benefits all Americans, and is worth the taxes.

Argument opposed

Raising taxes to create a new entitlement program — however well intentioned — is the last thing that the American taxpayer and the country’s economy need at the moment, especially with an unknown price tag.

Impact

All workers and taxpayers, their spouses and children, employers and business owners, the newly created Office of Paid Family and Medical Leave, and the Dept. of the Treasury.

Cost of S. 786

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Sponsoring Sen. Kirsten Gillibrand (D-NY) believes that current laws allowing for unpaid medical leave are insufficient, and that paid leave needs to be available to more workers. Sen. Gillibrand's press release also noted that:

“for less than ONE tall brewed Starbucks coffee ($1.85) or about the cost of ONE venti latte per week (over $4) we could create a program that will be so beneficial for our families. The average full time working woman earning the median weekly wage would receive a total of $5,514.48 if she took the full 12 weeks of paid leave.”

This proposal has previously been criticized as unfriendly to small businesses and the self-employed. In addition, one critique noted that it doubly burdens taxpayers who would essentially be paying the “employer” half of the tax burden for public employees.

Of Note: California and New Jersey have been operating similar family and medical leave insurance programs since 2004 and 2009, respectively, that provide compensation up to two-thirds of a worker’s monthly earnings.

Media:

• Sponsoring Sen. Kirsten Gillibrand (D-NY) Press Release
• Times Union
• U.S. News and World Report
• A Better Balance (In Favor)
• American Federation of Teachers (In Favor)
• The Hill (Opposed)
• National Partnership for Women and Families (In Favor)