Tagged Legislation

Tax Bill Provision Designed To Spur Paid Family Leave To Lower-Wage Workers

Tucked into the new tax law is a provision that offers companies a tax credit if they provide paid family and medical leave for lower-wage workers.

Many people support a national strategy for paid parental and family leave, especially for workers who are not in management and are less likely to get that benefit on the job. But consultants, scholars and consumer advocates alike say the new tax credit will encourage few companies to take the plunge.

The tax credit, proposed by Sen. Deb Fischer (R-Neb.), is available to companies that offer at least two weeks of paid family or medical leave annually to workers, but two key criteria must be met. The workers must earn less than $72,000 a year and the leave must cover at least 50 percent of their wages.

If contributing at the half-wage level, a company receives a tax credit equal to 12.5 percent of the amount it pays to the worker. The tax credit will increase on a sliding scale if the company pays more than 50 percent of wages. It could go up to a maximum credit of 25 percent of the amount the employer paid for up to 12 weeks of leave.

Payments to full- and part-time workers taking family leave who’ve been employed for at least a year would be eligible for the employer’s tax break. But the program, which is designed to test whether this approach works well, is set to last just two years, ending after 2019.

Aparna Mathur, a resident scholar in economic policy studies at the American Enterprise Institute, says the new tax credit sidesteps a pitfall for Republicans. They are wary of any legislation mandating that employers provide paid leave. The tax credit also is appropriately aimed at lower-wage workers who are most likely to lack access to paid leave, said Mathur, who co-authored a recent report on paid family leave.

But it’s not a big enticement.

“Providing this benefit is a huge cost for employers,” Mathur said. “It’s unlikely that any new companies will jump on board just because they have a 12.5 to 25 percent offset.”

That view is shared by Vicki Shabo, vice president for workplace policies and strategies at the National Partnership for Women & Families, an advocacy group, who said it will primarily benefit workers at companies already offering paid family leave. The new tax credit “just perpetuates the boss lottery,” she added.

Heather Whaling said her 22-person public relations company probably qualifies for the new tax credit, but she doesn’t think it’s the right approach. Whaling, the president of Geben Communication in Columbus, Ohio, already offers paid leave. The company provides up to 10 weeks of paid leave at full pay for new parents. Four employees have taken leave, and by divvying up their work to other team members and hiring freelancers they’ve been able to get by.

“It is an expense, but if you plan and budget carefully it’s not cost-prohibitive,” she said.

The tax credit isn’t big enough to provide a strong incentive to provide paid leave, said Whaling, 37. Besides, “having access to paid family leave shouldn’t be luck of the draw, it should be available to every employee in the country.”

Still, the tax credit may be appealing to companies that have been considering adding a paid family and medical leave benefit, said Rich Fuerstenberg, a senior partner at benefits consultant Mercer.

By defraying some of the cost, the tax credit could help “tip them over” into offering paid leave, he said. But  “I’m not even sure I’d call it the icing on the cake,” Fuerstenberg said. “It’s like the cherry on the icing.”

Only 15 percent of private-sector and state and local government workers had access to paid family and medical leave in 2017, according to the Bureau of Labor Statistics’ National Compensation Survey. Eighty-eight percent had access to unpaid leave, however.

Under the federal Family and Medical Leave Act, employers with 50 or more workers generally must allow eligible employees to take unpaid leave for up to 12 weeks annually for specified reasons. These include the birth or adoption of a child, caring for your own or a family member’s serious health condition, or leave for military caregiving or deployment. An individual’s job is protected during such leaves.

A tax credit that can be claimed at the end of the year is unlikely to encourage small businesses to offer paid family and medical leave, said Erik Rettig, an expert on family leave policies at the Small Business Majority, which advocates for those firms on national policy.

“It isn’t going to help the family business that has to absorb the costs of this employee while they’re gone,” Rettig said.

A better solution, according to Shabo and others, is to provide a paid family leave benefit that’s funded by employer and/or employee payroll contributions. Sen. Kirsten Gillibrand (D-N.Y.) and Rep. Rosa DeLauro (D-Conn.) last year reintroduced such legislation. Their bill would guarantee workers, including those who are self-employed, up to 12 weeks of family and medical leave with as much as two-thirds of their pay.

A handful of mostly Democratic states — including California, New Jersey, Rhode Island and New York — have similar laws in place, and a program in the District of Columbia and Washington state will begin in 2020.

“We know from states that this approach works for both employees and their bosses,” Shabo said.

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CHIP Renewed For Six Years As Congress Votes To Reopen Federal Government

A brief, partial shutdown of the federal government was resolved Monday, as the Senate and House approved legislation that would keep federal dollars flowing until Feb. 8, as well as fund the Children’s Health Insurance Program for the next six years.

The legislation is awaiting President Donald Trump’s signature, expected later Monday evening.

The CHIP program, which provides coverage to children in families who earn too much to qualify for Medicaid but not enough to afford private insurance, has been bipartisan since its inception in 1997. But its renewal became a partisan bargaining chip over the past several months.

Funding for CHIP technically expired Oct. 1, although a temporary spending bill in December gave the program $2.85 billion. That was supposed to carry states through March to maintain coverage for an estimated 9 million children, but some states began to run short almost as soon as that bill passed.

The Georgetown University Center for Children and Families estimated that 24 states could face CHIP funding shortfalls by the end of January, putting an estimated 1.7 million children’s coverage at risk in 21 of those states.

Meanwhile, both houses of Congress had been at loggerheads over how to put the program on more firmer financial footing.

In October, just days after the program’s funding expired, the Senate Finance Committee approved a bipartisan five-year extension of funding by voice vote. But that bill did not include a way to pay the cost, then estimated at $8.2 billion.

In November, the House passed its own five-year funding bill for the program, but it was largely opposed by Democrats because it would have offset the CHIP funding by making cuts to Medicare and the Affordable Care Act (ACA).

Prospects for a CHIP deal brightened earlier this month when the Congressional Budget Office re-estimated how much the extension of funding for the program would cost. In a letter to Senate Finance Committee Chairman Orrin Hatch (R-Utah) on Jan. 5, CBO said changes to health care made in the tax bill would result in lowering the five-year cost of the program from $8.2 billion to $800 million — effectively a reduction of 90 percent.

The reason, explained CBO, is that the landmark tax bill passed in December eliminated the ACA’s individual mandate, which would likely drive up premiums in the individual market. Those higher premiums, in turn, would increase the federal premium subsidies for those with qualifying incomes. As a result, if kids were to lose their CHIP coverage and go onto the individual exchanges instead, the federal premium subsidies would cost more than their CHIP coverage.

Driving that point home, on Jan. 11, CBO Director Keith Hall wrote to Rep. Frank Pallone (D-N.J.) that renewing CHIP funding for 10 years rather than five would save the federal government money. “The agencies estimate that enacting such legislation would decrease the deficit by $6.0 billion over the 2018-2027 period,” the letter said.

That made it easier for Republicans to include the CHIP funding in the latest spending bill. But it infuriated Democrats, who had vowed not to vote for another short-term spending bill until Congress dealt with the issue of immigrant children brought to the country illegally by their parents.

Republicans, said Senate Minority Leader Chuck Schumer (D-N.Y.) on Sunday, “were using the 10 million kids on CHIP, holding them as hostage for the 800,000 kids who were Dreamers. Kids against kids. Innocent kids against innocent kids. That’s no way to operate in this country.”

Republicans, however, said it was the opposite — that Democrats were holding CHIP hostage by not voting for the spending bill. “There is no reason for my colleagues to pit their righteous crusade on immigration against their righteous crusade for CHIP,” said Hatch. “This is simply a matter of priorities.”

The CHIP renewal was not the only health-related change in the temporary spending bill. The measure also delays the collection of several unpopular taxes that raise revenues to pay for the ACA’s benefits. The taxes being delayed include ones on medical device makers, health insurers and high-benefit “Cadillac” health plans.

The bill does not, however, extend funding for Community Health Centers, another bipartisan program whose funding is running out. That will have to wait for another bill.

KHN’s coverage of children’s health care issues is supported in part by the Heising-Simons Foundation.

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