Lawmakers Want New Taxes on Workers, Businesses to Fund Paid Family Leave

    Sen. Mattie Daughtry speaks at a press conference supporting Paid Family and Medical Leave on Tuesday, February 7, 2023 (Source: Maine Senate Democrats)

    Maine is poised to join thirteen other states and Washington, D.C., in creating a government program that levies new taxes on workers and businesses to provide paid medical and family leave to employees, but major details of the proposed law are still up in the air.

    Given the composition of the legislature, it’s no longer even a question of ‘if’ Maine will pass a paid leave law, but what it will ultimately look like.

    “It’s still not clear how they intend to pay for it, or what kind of formula they’ll put into the bill,” said Rep. Dick Bradstreet (R-Vassalboro), the lead Republican on the legislature’s Joint Committee on Labor and Housing.

    “We made it clear that we need answers on this soon,” he said.

    Often lawmakers pay scant attention to the unintended consequences of new rules on the business environment in a state that already has plenty, Bradstreet noted.

    Bradstreet’s comments followed a presentation before the committee on Tuesday from the Commission to Develop a Paid Family and Medical Leave Benefits Program, the culmination of an effort spearheaded by Sen. Mattie Daughtry (D-Cumberland).

    Daughtry joined forces last month with Assistant House Majority Leader Kristen Cloutier (D-Lewiston) to introduce a bill that would create the new government program.

    Like hundreds of other bills currently circulating through the legislature, that bill is still a concept draft.

    However, the commission’s report offers a few details as to what the new rules would look like.

    The program would create a new benefit administered by the Department of Labor or a different third-party.

    The word “tax” isn’t mentioned once in the commission’s report; instead, the dollars taken from employees’ paychecks — and employers bottom lines — are referred to as a “contributions.”

    Nonetheless, funding for the program would come from a yet-to-be-determined blend of new taxes on businesses and workers.

    The report recommends that employers with fewer than 15 employees be exempt from paying the paid leave tax, though all employees would be subject to the tax. Larger employers would pay a paid leave tax rate based on total wages, the report recommends.

    The blend of new taxes on business owners and their workers may be a 50-50 split, an 80-20, or 75-25, according to various options in Tuesday’s presentation. Precisely who shares what proportion of the tax burden for the new program is one of many details still up for debate.

    In return for the new taxes, Maine workers would be eligible to receive payouts from the state when taking qualified leave. Qualified leave would include taking time off for a new child, caring for a loved one with a serious health issue, or emergencies related to a relative’s military deployment.

    The commission estimates that standing up the program would cost $65 million to create the technology to administer the system — $15 million more than envisioned by those advocating for a paid family and medical leave ballot initiative.

    “As a young woman and a small-business owner, this issue is particularly important to me,” said Daughtry, who co-owns a microbrewery in Brunswick.

    “Not only do I want to be able to offer a benefit like this to my employees, but as someone who wants to someday start a family, it’s a policy I will also need,” she said.

    Senate Democrats noted in a press release that 77 percent of Maine workers don’t have access to paid family and medical leave. Democrats also touted a recent poll that found a majority of Mainers support family and medical leave when asked about a hypothetical program paid for entirely by employers.

    But the details — like who is paying what, who’s running the program, when are workers eligible and for how long — matter. And regardless of its final form, the new regulations and taxes would add another layer of bureaucracy and cost onto Maine’s businesses.

    In a 2021 report, the Mercatus Center at Virginia’s George Mason University found Maine ranked among the most regulated states in the nation when it comes red tape for employers. The Maine Development Fund ranks the state as the country’s 10th most costly in which to do business. A recent study by the Maine Jobs Council found Maine ranks near the bottom of pretty much every economic ranking of states.

    Democratic Gov. Janet Mills did not request funding for a paid leave program in her biennial budget proposal last month, but backers of the emerging leave bill are hoping her administration will cooperate to find the funding for the program.

    Hanging over the legislature on this question is the prospect of a citizens’ initiative should lawmakers not pass the new benefit this session.

    In a July filing with the Commission on Ethics and Governmental Practices, the Maine People’s Alliance disclosed a donation of $250,000 toward the ballot initiative. The report disclosed that the group’s top donors included national progressive dark money funds, like the 1630 Fund and the Omidyar Network, two national left-wing groups that support progressive candidates and causes across America.

    Chances are there’s more money where that came from. National progressive groups continue to rank the institution of a paid family and medical leave among their top priorities, according to activists.

    Given the resources at play in pushing paid leave in Maine, the Daughtry-Cloutier bill is likely to gather momentum in coming weeks. Meanwhile, business owners in the state are already bracing themselves for this, and will be anxiously watching how the details play out.

    The proposal — and the new taxes — could take effect as soon as Jan. 1, 2024.

    “It would be better if they don’t try to ram this through at the end of the session,” Rep. Mike Soboleski (R-Phillips), another committee member who sat through Tuesday’s presentation noted. “This is something we need to carefully consider.”


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