There is a new plan making its way through the D.C. Council that would give workers four months of paid family leave, and some are saying it should serve as a model for the whole country. There’s just one problem: It’s not cheap.
If a plan like the one proposed for the district were implemented on a national level, it could cost almost $2 trillion, according to a study produced by the American Action Forum (AAF). The AAF, a right-leaning policy research institute, took the details of the D.C. plan and extrapolated the tax structure to the federal level to show how all Americans would be affected if it became national law.
Members of the D.C. city council introduced legislation Tuesday that would force businesses in the city to offer workers up to 16 weeks of paid time off to care for a new born baby or a sick relative, to recover from an illness, or recuperate after a military deployment.
Businesses, regardless of their size, would be required to pay into a Family and Medical Leave Fund. According to the proposed law, business owners would pay into the fund based on what their employees earn.
Companies that employ high salary-earners would pay one percent of the salaries of employees who earn more than $150,000. On the other hand, low-income employers, such as minimum wage workers, would pay around 0.5 percent of each employee’s pay. Employers would not be forced to pay in to the fund for workers who make less than $10,000 per year.
The new entitlement program language is written to be gender neutral, so both men and women would be allowed to take advantage of the paid leave. For the 16 weeks of leave, the district would provide benefits to people equal to 100 percent of their income up to $1,000 per week. If someone makes more than $1,000 per week, that person would receive $1,000 plus 50 percent of additional pay up to $3,000.
In order for workers to receive the benefits, they would submit forms to the mayor’s office to determine if they are eligible or not. The mayor’s office would then determine when the pay period starts, how long it will last, and how much the person receives.
President Barak Obama, Hillary Clinton and others have expressed support for the plan to serve as a model for national paid family leave legislation, but that idea may be costly to tax payers.
The study identifies two separate boundaries for how much the country would spend, with the actual number falling somewhere in the middle. If every worker in the country took 16 weeks paid leave, it would cost about $1.9 trillion. That, however, is not likely to happen.
On the lower end, the study uses 16 percent of workers; roughly the number of people that take unpaid leave annually under the national Family and Medical Leave Act that became law in 2012. If 16 percent of U.S. workers took paid leave under the D.C. plan, it would cost the country more than $306 billion.
Since it is more likely that people will take advantage of a paid leave program versus an unpaid leave program, the number will likely fall somewhere between those two boundaries.
The plan, implemented across the whole country, would cost the government, on average, almost $13,000 per worker who takes advantage of the entitlement program. Most of the benefits of the program, almost 57 percent, would go to people making more than $52,000 per year.
In addition, those people making more than $5,000 per week would receive $48,000, while those making between $1,000 and $5,000 would get just $22,000.
“Taken at face value, the scale of the program implies that the employer tax proposed by the D.C. Council would not come close to covering the program’s national expenses,” the report reads.
If the D.C. tax structure were implemented nationwide, it would only raise around $61 billion, which equates to 20 percent of the lower boundary of the cost estimate. In order to cover the whole $306 billion, the tax rate would need to be set at nearly 4 percent of all workers’ salaries.
The program has been lauded by activist groups as a giant step forward for equality in the workplace. Debra Ness, president of the National Partnership for Women and Families called the bill an important opportunity to advance family friendly workplaces.
“By creating a paid family and medical leave insurance program that would make paid leave accessible to virtually everyone, the proposal would establish a much-needed standard that would have a tremendously positive impact on the city’s workers and their families, businesses of all sizes, and the local economy,” she said in a statement.
Business groups in the city were less thrilled with the potential new tax, though.
Dave Oberting, a Republican candidate for D.C. Council and executive director of the Economic Growth DC Foundation told The Daily Caller News Foundation that it should be up to businesses to decide whether they want to offer paid leave, and said delivering that benefit through an unfunded mandate will only hurt low-skill workers.
“The authors of this bill live in an economic fantasy land if they think they can continue to pile cost after cost upon small businesses and encounter no negative repercussions for workers. Talk about voodoo economics,” he said.
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