Beware the Paid Family Leave Fig Leaf in GOP’s Tax Plan

(Photo: AP/J. Scott Applewhite)

Sen. Deb Fischer, R-Neb., accompanied by Senate Minority Leader Mitch McConnell of Ky., talks during a 2014 news conference on Capitol Hill in Washington.

It’s admittedly hard to keep track of all the various moving parts and rotten eggs hidden throughout the Senate Republicans’ pernicious tax cut scheme, which they jammed through in the early morning hours Saturday just hours after releasing the full text—handwritten marginalia and all.

One particular part that hasn’t received all that much attention is a paid family leave tax credit for companies that provide at least two weeks of paid parental leave.

Ostensibly as a means for encouraging the expansion of paid family leave, employers would receive a tax credit for 12.5 percent of the employees’ pay if they pay those workers 50 percent of their wages. Alternatively, employers would get a 25 percent credit if they pay their workers 100 percent of their wages on leave. The period of the leave would last for up to 12 weeks and apply to a parent’s leave taken within one year of a birth or adoption. The policy would only apply to employees with annual pay below $72,000.

The tax credit comes from legislation introduced by Nebraska Republican Senator Deb Fischer over the past few years and was written into the Senate tax bill in November. “This is a big step toward enacting the first nationwide paid leave policy in U.S. history,” Fischer announced then.

But it’s a far cry from an effective national paid leave policy. In reality, the plan is just one more corporate giveaway in a bill that’s chock-full of them. It’s entirely unclear whether tax credits are a credible way to incentive companies to enact paid family leave. As critics point out, a 25 percent tax credit is probably nowhere near enough to convince companies that don’t provide paid parental leave—either because they legitimately can’t afford it or just don’t want to—to provide it.

On top of that, the tax credit sunsets in 2019 (which would hardly give companies a chance to enact paid leave polices).

“It essentially subsidizes large corporations who already provide paid family leave,” says Ellen Bravo, co-executive director of Family Values @ Work, an advocacy group that supports universal paid family leave. “It’s one more giveaway to large corporations.”

The beneficiaries could include prominent companies that have all recently enacted generous paid family leave policies—among them, Ikea, Coca-Cola, Campbell’s, 3M, and Nike, all companies that will already benefit from the bill’s lucrative cut in the corporate tax rate.

The United States is just one of a very few countries in the world that does not mandate paid time off for parents to care for newborns. Despite widespread support for such a policy in the United States, just 15 percent of employees have access to paid leave, chiefly as a result of laws that have been enacted in a handful of states. As the Huffington Post reports, one-quarter of new mothers are back on the job less than two weeks after giving birth.

The fight for paid family leave has become a cause célèbre in American politics, with consensus ranging from left to right that something needs to be done. President Trump even floated a policy requiring six weeks of paid time off in his federal budget proposal in May.

Advocates of a progressive paid family leave law have rallied around the FAMILY Act, spearheaded by New York Senator Kirsten Gillibrand and Connecticut Congresswoman Rosa DeLauro (both Democrats). The plan would provide up to 12 weeks of paid time off, allowing all workers to earn up to 66 percent of their normal wages (with higher percentages required for low-wage workers), and funding it through small payroll contributions from employers and employees alike.

Currently, several cities and four states—California, Rhode Island, New York, and New Jersey, along with Washington, D.C.—have paid family leave laws that are funded through a social insurance mechanism paid into by employees.

However, as Daniel Hemel, a tax professor at the University of Chicago, points out, the provision in the GOP tax bill does not apply to paid leave that’s required by state or local law. “This seems specifically designed as a jab to [the blue states that] have taken the lead on requiring/providing paid leave,” he wrote on Twitter, because it essentially prohibits companies that abide by the law in those paid-leave states from benefitting from the federal tax credit.

As Hemel says, it wouldn’t have been that hard to craft a provision in way that doesn’t exempt these states and still had the same economic effects—for instance by providing the credit to employees rather than employers.

But it’s not surprising that Republicans opted not to: while much of the bill is focused on benefitting the wealthy, it’s also filled with several provisions that penalize taxpayers in blue states. Nowhere is that more apparent than with the GOP’s repeal of the State and Local Tax (SALT) deduction, which will hurt taxpayers in higher tax blue states like New York, New Jersey, Connecticut, and California.

Add this paid family leave provision to the list.

So beware when Republicans start talking up their paid family leave accomplishments. “[The tax credit] checks off the box of being supportive [of paid leave] without doing the work,” says Bravo. 

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