Economics

Paid Family Leave Act Will Raise Taxes

The act’s supporters ignore its many costs.

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Following increased interest in expanding access to paid family and medical leave, Rep. Rosa DeLauro (D–Conn.) joined forces with Sen. Kirsten Gillibrand (D­–N.Y.) to promote the Family and Medical Insurance Leave, or FAMILY, Act. If we believe the act's supporters, it would cost close to nothing and provide essential benefits to employees who don't currently receive them.

Unfortunately, these claims are bogus.

Under the FAMILY Act, the federal government would offer 12 weeks of paid time off to enable workers to care for infants, recover from major illnesses, and care for severely ill relatives. During that time, employees would receive benefits administered by the Social Security Administration equal to 66 percent of their regular earnings, with a minimum monthly benefit of $580 and a maximum monthly benefit of $4,000. To pay for this new handout, the federal government would impose a 0.4 percent payroll tax to be divided evenly between employers and employees.

Gillibrand argues that the act would provide greatly needed benefits to employees at a minimal cost to them. One of her favorite talking points about the proposal is that it would cost employees only $4 a week, or the equivalent of a cup of coffee.

Unfortunately, the senator's assertion is quite misleading. For starters, a 0.4 percent hike in the payroll tax would not be enough to pay for the federal spending under the plan. The Congressional Budget Office, or the CBO, released a score of the bill as introduced and found that the FAMILY Act would increase spending by $547 billion in benefits and administrative costs over 10 years, but it would only increase net federal revenues by $319 billion during that time. That means that $228 billion in spending wouldn't be paid for by the FAMILY Act's new tax.

While the federal government is no stranger to deficits, in this case—and contrary to what FAMILY Act supporters seem to believe—this deficit will require either more tax revenues or fewer government benefits. The CBO points out that the act "would limit program outlays to amounts in the trust fund," which the Heritage Foundation's Rachel Greszler explains in her recently released paper "is the accumulation of the FAMILY Act's payroll taxes." This means that one way or another, spending must equal tax revenues. Therefore, Congress will have to either ration benefits or raise the payroll tax.

By how much? It would double within four years of the first benefits, which would be paid in October 2022.

Greszler calculates that as the number of people claiming the benefit increases, if benefits aren't rationed, "In 2023, the initial 0.4 percentage point payroll tax would have to rise by 25 percent to 0.5 percentage points. By 2026, the necessary payroll tax would need to double to 0.8 percentage points, and by 2028, it would need to rise to about 240 percent of its initial level, to 0.95 percentage points." And that's just the beginning. This, of course, is on top of the already steep and regressive existing payroll tax.

Moreover, even though employees and employers split the FAMILY Act's payroll tax, most of the employer's share of the tax will still fall on workers. That's because, over time, employers shift the costs of new taxes onto employees in the form of lower wages. In other words, employees will shoulder most of the payroll-tax increase. The CBO accounts for some of this shifting as it projects a $42 billion reduction in federal revenues because employers will reduce workers' wages and benefits.

The FAMILY Act would also lead to other undesirable changes, like a shift in resources from those with lesser means to those who already have more. Greszler explains that in the United States, "where substantial employer-provided paid family leave exists, a government program could be even more regressive because it would provide windfall benefits to larger companies and higher-income employees who already have paid family leave policies." This is currently happening with state-based paid family leave programs. Companies that used to provide the benefits are now asking their employees to tap into the taxpayer provided program first.

Finally, but importantly, economic research reveals that employees—and women in particular—in countries where government has implemented such benefits face more discrimination, fewer advancement opportunities, fewer hours of employment, and lower wages. These are the unseen costs of such programs that the act's supporters ignore.

All of these facts together make for a very expensive cup of coffee.

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  1. I don’t think we should be paying people to leave their families.

    1. Sounds like a Roseanne Roseannadanna rant.

      1. I thought I was gonna die!

  2. Y?, because we like you.

  3. Everything the government mandates raises taxes.

  4. $4000/mo. from the government for choosing to have a kid? F that. That’s close to what I earn (before taxes) and they expect me to subsidize the choice of people with more means to procreate?
    My wife and I saved before getting pregnant and continued to scrimp and save during her pregnancy. This is part of actual family planning (contrary to the planned parenthood version.) I understand the rationale some amount of aid, but it should either be a flat rate or based on the local economy. If someone makes more money then why should the taxpayer have to spend more on their choices? Also, is this a one time thing or can a person do this as many times as they want? People need to be responsible for themselves and fund their own choices. The fact that government wants to keep stepping in to distort this is a major problem.

  5. See, this is why you have a family meeting once a week where you all gather together and watch Cool Hand Luke until your kids can memorize the lines.

    “You gonna get used to wearin’ them chains afer a while, Luke. Don’t you never stop listenin’ to them clinking. ‘Cause they gonna remind you of what I been saying. For your own good.”

    “Wish you’d stop being so good to me, Captain.”

    1. wipin’ it off here, boss.

  6. Thanks Trump for advocating paid leave, you fat piece of shit.

    1. Right. Because Gillibrand hasn’t been advocating for this for years.

    2. Excuse me… The Family Leave Act was written and being sponsored by [D] member in the House.

      1. Trump and his idiot daughter have made this an issue.

  7. Massachusetts is run through the unemployment department

    Despite whining to the contrary, unemployment insurance is of no consequence costwise.

    Most people will not take time off for spurious reasons when they do not get paid the same as normal.
    You only have so many kids, so many sick relatives etc

    It only just started so time will tell how well it works
    Libertarians should realize how stupid it sounds to declare the end of the world when any new policy comes about that every other industrialized country already does, and their economies fail to collapse

    1. Why do you support government coercion?

      1. Why do you not have a intelligent and nuanced opinion on the role of government?

        1. It’s not government’s proper role to forcibly redistribute wealth; that is theft. There is no room for nuance.

          1. Two trolls talking to each other. Hilarious.

            1. Theory – It’s the same troll, with a split personality disorder.

            2. Says the guy who claims to be against raising taxes yet supports raising tariffs.

        2. “Why do you not have a intelligent and nuanced opinion on the role of government?”

          Why do you constantly prove to be a fucking lefty ignoramus, slaver?

        3. Mandated Family Leave means employers reducing hours and/or pay. Government cannot magically increase worker benefits.

    2. BTW, Reason has an article up on why mandated paid leave doesn’t work.

    3. It’s not the end of the world, but libertarians are rightfully annoyed every time the government violates liberty. Mandated leave means other people are forced to pay for you doing nothing.

      1. Unless that violation is more taxes which you urgently support.

        1. You support higher tariffs. Lol.

        2. Since you won’t address this issue or the fact that not every Trump budget was veto proof, I will now declare victory.

      2. I have a RIGHT to have the government force other people to pay for my basic needs. And a few wants. You fascist dick.

        Haha

    4. The median rank of the top 41 economies in the world is 21 – we can easily keep doing what other countries do without worrying about the economic effects as long as our economy stays somewhere in the Top 20.

    5. Well, when you start with an obviously false premise (that “unemployment insurance is of no consequence costwise”), don’t expect people to take you seriously.

      It doesn’t help when you pile on with a strawman fallacy. The article above does not claim “the end of the world”. It merely says that the policy will be a lot more expensive than it’s proposers have admitted and that the burden of those costs will fall heaviest on the very people that the proposers claim to want to help. In other words, it’s going to be expensive and ineffective. You don’t think that’s worth pointing out?

      1. I was going to say this. Thanks for saving me the typing time.

  8. “During that time, employees would receive benefits administered by the Social Security Administration equal to 66 percent of their regular earnings”

    “These are the unseen costs of such programs that the act’s supporters ignore.”

    Well, it looks like those casts are no longer unseen.
    Of course, that is irrelevant.
    This is an open plan to raise social security taxes; where are the mobs with torches and pitchforks?

  9. “only $4 a week, or the equivalent of a cup of coffee”

    This is a common refrain among politicians, and it certainly sounds reasonable enough.

    You know what’s not reasonable? Me paying for 183 freakin’ cups of overpriced coffee every week. Cut spending.

    1. I drink tea. It costs a few cents per cup.

      1. You should be forced to drink dozens of cups of exorbitantly priced coffee daily… for the children, and fair share, things we do together.

  10. here in Texas we build the F-35 at$80M a copy. current program costs are around $750 B . everyone at Lockheed gets a nice paycheck. Shareholders make a bundle and of course they got a tax break.

    so far it has flown no actual missions.

    but what , spend tax dollars on people? why its diabolical.

    1. Amazing how one can’t be against both of those programs, right?

    2. “…but what , spend tax dollars on people? why its diabolical.”

      Now we have a brand new lefty ignoramus peddling the same shit.
      Notice the argument that since we’re (supposedly) already wasting money, why, of course, we should waste some more on this idiot’s fave cause!
      How…………………
      boring and idiotic.
      Fuck off, slaver.

      1. I always recommend you guys who despise government there is a simple remedy: move to Mexico.

        1. Why should we move? It’s your ideas which suck.

  11. so far it has flown no actual missions.

    On 27 September 2018, a USMC F-35B attacked a Taliban target in Afghanistan, the first U.S. combat employment

    On 27 April 2019, USAF F-35As were first used in combat in an airstrike on an Islamic State tunnel network in northern Iraq.

    On 25 June 2019, the first combat use of an RAF F-35B was reportedly undertaken as armed reconnaissance flights searching for Islamic State targets in Iraq and Syria.

  12. Raise taxes, or debt?

    1. CUT expenditures….

  13. Sounds like the [D] parties new subject of [WE] dictation will be forcing (Monopolizing) labor — specifically joining the GOV WORKERS UNION.

  14. “…If we believe the act’s supporters, it would cost close to nothing…”

    Hey, they found hundreds of acres of Jackson trees, just waiting to be harvested.

  15. No new SS taxes. Period.

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