Commentary: Paid Family Leave Proposal Shows Why Vermont is Unaffordable (January, 2019)

January, 2019

By Rob RoperRob Roper

As a result of the November 2018 elections, Vermont Democrats and Progressives achieved veto-proof majorities in both chambers of the legislature. Their first priority flexing this new muscle is to pass a mandatory, government-run Paid Family Leave program that will require a new payroll tax. This proposal demonstrates exactly why Vermont is an unaffordable, unfriendly place to live and do business.

The proposal, a version of which Governor Scott successfully vetoed last session, would mandate all Vermont workers begin paying a new 0.93 percent payroll tax, which would fund a government-run insurance program providing twelve weeks of paid leave at 100 percent of salary for new parents or those dealing with a family illness. Why mandatory? Because, according to news reports, “they [Speaker Mitzy Johnson (D-Grand Isle) and Sen. Tim Ashe (D-Chittenden)] said that a paid family leave program shouldn’t be voluntary, because it wouldn’t be able to attract the participation required to make it affordable.”

So, basically, the majority party leaders want to impose a new payroll tax on Vermont workers and create a new financial and bureaucratic burden for Vermont businesses to implement a new government program that people, by their own admission, don’t want. This is why Vermont is unaffordable for working people and has a national reputation as a terrible place to do business.

The median annual household income in Vermont is $57,808, which means the new tax will cost that household budget $538 a year for a benefit most wouldn’t sign up for and don’t need.

Not mentioned in any of the media coverage, it will create an uncalculated new cost of doing businesses for Vermont employers, who will now have to spend time and resources tracking and reporting employee data to the state in compliance with the law. It’s worth noting that many Vermont businesses already offer some form of paid leave, either formally or informally. Those that don’t tend to be small, struggling businesses that genuinely can’t afford to do so. Forcing them to do so will be a major hardship.

The program will also increase state bureaucracy necessary to run the new government program. In 2017 the Joint Fiscal Office scored the original Paid Family Leave bill, H.196, estimating that the administrative costs of running the program would consume 7.5 percent of benefits, and will require a new $2.5 million IT system, and we all know how well the state does with new IT systems!

Governor Scott proposed an alternative Paid Family Leave program in partnership with New Hampshire that would be both voluntary for private businesses and run through a private insurance company rather than the state. This is a far better — and much fairer – alternative.

Critics of the Governor’s plan say that his proposal will be more expensive for participants. Yes and no. Yes, it would be slightly more expensive for those who volunteer to participate. But, for the majority of Vermonters who choose not to participate in the program it will be much cheaper – as in zero. This is fair. Those who want the program will pay to support it and benefit from it. Those who feel their scarce resources would be put to better use elsewhere would be free to invest as they see fit. But, again fairly, they won’t benefit from the Leave program.

The fact that the Governor’s proposal would utilize an existing, private insurance provider that is expert in managing programs like this means that the state would not have to incur the unnecessary and inefficient expense of “reinventing the wheel” within an expanded state bureaucracy that is, frankly, not expert in running insurance programs. The total cost of this system would undoubtedly be less than the mandatory tax scheme.

Paid family leave benefits are certainly a good thing. The employers that are able to offer such benefits create for themselves a competitive advantage in hiring and retaining the best employees. But, this comes at a cost that the employer and the employee, and they, not the legislature, are in the best position to determine if this benefit makes sense for them.

– Rob Roper is president of the Ethan Allen Institute. He lives in Stowe.

Corrected, 1/30/19. The original publication incorrectly stated Vermont’s median household income was $74,426. This and the tax calculation based on that number have been corrected. 

 

{ 8 comments… read them below or add one }

Robert January 23, 2019 at 12:23 am

Not soon enough, but eventually the joke will be on the dim bulbs who continually vote for tin-pot dictators like Johnson and Ashe after the rest of us have left. When they are paying the full freight for their blind support of these economic terrorists they may start actually thinking before they vote.

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Kimberly McGregor Clark January 23, 2019 at 1:08 am

I actually wanted to ADD a comment rather than reply to Robert, although he made a good point. Kimberly

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Kimberly McGregor Clark January 23, 2019 at 1:05 am

I agree with the commentary in this piece. I would also like to add that Ivanka Trump has pursued this very type of law which includes more leave for people having families This is from the top down. I am not making this a partisan statement but Ivanka Trump does not always act in the conservative,( less government intrusion) way that her father speaks of. Vermont needs to stop adopting every lame brained idea that comes down the pike. Socialism has failed in every country it devoured. Idealism never puts food on the table. Take back Vermont! THIS should be the new slogan. Kimberly McGregor Clark

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Patrick Killoran January 23, 2019 at 1:15 am

I just don’t understand how you can reconcile this position with your vigorous defense of using public money for private schools. If every child deserves the opportunity to use everyone’s money to go to whichever school best suits them, logic dictates that every family deserves the opportunity to weather the unexpected events and shared joys of death, medical emergencies, births and so forth without losing their shirts. You say most families don’t need this benefit- that is total hogwash. Every family needs this. You say this makes Vermont unfriendly. It’s unfriendly to actively support traditional family values? Perhaps you can connect the dots for me, because I read this as nonsense.

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Rob January 23, 2019 at 1:45 am

Hi Patrick. I don’t see school choice as using public money for private schools. Rather, I see it as using public money to educate the public in the most effective, efficient, and equitable way. If everybody wants and needs a paid family leave program, then a voluntary program should attract, well, everybody. Therefore you should have no objection to the voluntary program I endorse in the piece.

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Patrick Killoran January 23, 2019 at 3:55 am

Hi Rob, thank you very much for taking the time to respond to me, I appreciate and respect that. However, I don’t believe you’ve really clarified your thinking here- rather than bridge the philosophical disconnect between your positions on these two issues, you seem to me to have doubled down on it. We are one hundred percent in agreement that “public money [can be used] to educate the public in the most effective, efficient, and equitable way,” but you are quibbling over the use of the word “private,” when our state’s voucher program literally does use public money to subsidize enrollment in public schools. I do not see how your splitting hairs over two statements that are both absolutely true contributes substantively to resolving my inquiry.

Everyone pays for the school subsidies, but not all Vermonters take advantage. By your own logic relating to medical leave , we should then not have school subsidies- why should I pay for someone else’s child to attend the school of their choice? Paying for it isn’t voluntary, but using it is. So why not family medical leave? I am not objecting to voluntaryism, I’m objecting to your premise that education can work this way but not family planning and emergency health management.

What you haven’t explained is why we can’t use “public money to [enrich the health of families] in the most effective, efficient, equitable way.” Based on your own numbers, we’re talking about 700 bucks a year on a worker. Every single family experiences births, deaths, and health emergencies, and it is known that healthcare freefall is the leading cause of bankruptcy. 700 bucks a year for coverage allowing every mother to bond with her baby, every father to rest easier knowing he won’t lose his job if his child needs medical interventions, every person who has to take time to arrange care for an ailing elderly parent- that money will not break our state, it will strengthen it. Here are people- and make no mistake, despite your dismissal, *most* Vermonters would use this- who will be able to return to their jobs productive and healthy, with stronger families and communities, rather than leaving the work force. Medical leave creates better employees who change jobs less often, saving employers countless dollars on recruiting and training and replacing institutional knowledge. There is far more to gain than there is to lose. We both believe in developing Vermont in ways that strengthen our economy and our citizenry- providing family medical leave does exactly that.

Apologies for the length of this post- ultimately it just seemed that your response was a non-answer or restatement of the contradiction you’ve presented. In terms of your consistency, one of these things is not like the other. I’ll pay for your kids to go a fine prep or charter school if you pay for my wife to have meaningful time to invest in our new baby- seems like a fine compromise to me. Of course, the voucher program disproportionately benefits affluent Vermonters at the public expense, while family medical leave disproportionately benefits poor Vermonters at the public expense, so I suppose there is a question of how dedicated you really are to voluntaryism- it is an awful lot easier to opt in to good schools and manage health crises when you’re affluent in the first place.

You get what you pay for, and well, if you want economy, you have to pay for it.

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Patrick Killoran January 23, 2019 at 3:58 am

Whoops. Typo above and it looks like I can’t edit. The sentence should read:

“…quibbling over the use of the word “private,” when our state’s voucher program literally does use public money to subsidize enrollment in private schools.”

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Deanne February 2, 2019 at 12:21 am

“To compel a man to subsidize with his taxes the propagation of ideas which he disbelieves and abhors is sinful and tyrannical.” Thomas Jefferson

“Publicly-funded” education is unconstitutional on the federal level. Beyond that, it is left “to the states, or to the people.” (Amendment X) The founding fathers assumed this was the domain of the parents.

I believe it is sinful and tyrannical to force me to fund the “public education” system, which propagates ideas I abhor. The “public” school system has taken over everyone’s lives – schedules, “education,” sports, music, and on and on. Those of us who reject socialized education end up paying twice for our children’s education, besides helping to fund it in general. This is unjust. Tax-funded education should be abolished.

Forcing people to pay into a “paid family leave” system is also socialism. It would not even be an option in a free society. People would be better off setting aside their own fund for such situations. Everyone should have a rainy day fund and not expect others to be forced to pay them when they aren’t working.

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