in the State Senate
on January 17, 2020
by a vote of
Purpose: To put in place a government-mandated Paid Family Leave program allowing employees to take up to 12 weeks of paid leave for the birth of a child, or 8 weeks for family care. The program would be paid for with a new payroll tax on employee’s income up to $137,700 (the Social Security taxable maximum). Employees eligible for the mandatory benefit can also choose to opt-in to medical leave.
Analysis: This vote would establish a government-mandated insurance program. The program would be funded by a new employee payroll tax of 0.2%. Employees can elect to pay an additional 0.38% of their wages to obtain medical leave of 6 weeks maximum.
In 2022, Vermonters are estimated to be taxed $30 million to pay for $25 million in benefits for Vermonters opting for birth and family leave according to Joint Fiscal Office analysis. In 2023, Vermonters are projected to pay less into the program than is needed to cover the cost: $30.8 million in taxes to fund $30.4 million in benefits, a 1.3% shortfall. The phenomenon is expected to continue.
The JFO projects the state to receive $23.2 million from those purchasing medical leave insurance to pay for $22.9 million in benefits, a net surplus. However, it is easier to project the revenue from a mandatory program. In a voluntary program, we can expect sickly Vermonters to buy medical leave at greater rates, while healthy Vermonters with steady wages will buy medical leave at lower rates. Both of these forces suggest the costs of Vermonters exercising their medical leave option will be high, while the revenue streams may be less than expected from those taking a break from the workforce at higher rates. This means an underfunded mandatory paid leave program may not be able to “borrow” from the voluntary leave parallel program. We can expect the tax (0.2%) and the price of voluntary insurance (0.38%) to increase over time as a result.
While all Vermont employees would have their wages taxed, only employees who work at least 675 hours annually (13 hours a week) for a single employer would be eligible to receive the paid leave.
JFO analysis indicates that benefit-eligible employees would receive 90% of their weekly wages that are at or below the Vermont Average Weekly Wage (VAWW is currently calculated at $13.26/hr, which is $27,582/year). They would get an additional 55% of their weekly wages that exceed the VAWW. For example, a worker making $20/hour would receive $625 weekly ($477 for their income qualifying as VAWW, plus $148), for up to 12 weeks. The maximum benefit would be capped at $1,334 per week.
Employers would have the option to pay some or all of the employee’s 0.2% wage tax. A Vermont household making the median income ($58k/year), would be taxed an additional $116 annually.
Those voting YES believe this program is a desirable benefit that will help retain and attract young families to Vermont. They argue the program must be mandatory or a lack of voluntary participation will drive up premium costs for those who do choose to enter the program.
Those voting NO believe the state cannot afford another tax/entitlement program. Some support the voluntary portion of the bill. They see this as a “heavy-handed payroll tax that thousands of low income and part-time workers will have to pay but will be ineligible to collect from.” If Vermont adopts paid family leave, it should be voluntary, not mandatory. They believe Vermonters “should be able to choose for themselves what they feel is best.”
Senate Journal, Friday, January 17, 2020. “…Shall the Senate accept and adopt the report of the Committee of Conference?, was decided in the affirmative on a roll call Yeas 20, Nays 9. Senator Sirotkin having demanded the yeas and nays, they were taken and are as follows…” (Read the Journal, p. 43-76)
JFO Analysis (Jan 2020), without calculations
Roll Call! House Passes Payroll Tax to Fund Paid Family Leave, 2020
Roll Call! Senate Passes Payroll Tax to Fund Paid Family Leave (19-10), 2019
How They Voted
(Click on Your Senator’s Name to View their Profile)
Timothy Ashe (D/P-Chittenden) – YES
Becca Balint (D-Windham) – YES
Philip Baruth (D-Chittenden) – YES
Joseph Benning (R-Caledonia) – NO
Christopher Bray (D-Addison) – YES
Randy Brock (R-Franklin) – NO
Brian Campion (D-Bennington) – YES
Alison Clarkson (D-Windsor) – YES
Brian Collamore (R-Rutland) – NO
Ann Cummings (D-Washington) – YES
Ruth Hardy (D-Addison) – YES
Cheryl Hooker (D-Rutland) – YES
Debbie Ingram (D-Chittendent) -YES
M. Jane Kitchel (D-Caledonia) – NO
Virginia Lyons (D-Chittenden) – YES
Mark MacDonald (D-Orange) – YES
Richard Mazza (D-Chittenden-Grand Isle) – NO
Richard McCormack (D-Windsor) – YES
James McNeil (R-Rutland) – NO
Alice Nitka (D-Windsor District) – YES
Corey Parent (R-Franklin) – NO
Chris Pearson (P-Chittenden) – YES
Andrew Perchlik (D-Washington) – YES
Anthony Pollina (P/D-Washington) – YES
John Rodgers (D-Essex-Orleans) – NO
Richard Sears (D-Bennington) – ABSENT
Michael Sirotkin (D-Chittenden) – YES
Robert Starr (D-Essex-Orleans) – YES
Richard Westman (R-Lamoille) – NO
Jeanette White (D-Windham) – YES