Hillary's Proposal For Paid Family Leave Will Likely Look Like This

Help for new moms and dads, without new middle class taxes.
MANDEL NGAN via Getty Images

Hillary Clinton has said she wants to make sure every working American can take time off, with pay, in order to care for a newborn or sick relative -- just like the workers in every other developed country can.

Are those promises compatible? Yes, according to a new report from a prominent liberal think tank. But, like all policy choices, financing a paid leave program without middle-class taxes would entail some trade-offs.

The report comes from the Center for American Progress, which has promoted paid leave for years and has close ties to the Clinton campaign. Just a year ago, the center issued a detailed, high-profile paper that sketched out how a paid leave program could work: workers would be eligible for up to 12 weeks of paid time off to take care of a relative or to recover from illness and the money to pay them would come from a small payroll tax. The Social Security Administration, which already handles disability insurance, would administer the program and write the checks.

The idea of tying paid leave to an existing social insurance program and then financing it with a payroll tax is not novel. The FAMILY Act, a paid leave proposal from Sen. Kirsten Gillibrand (D-N.Y.) and Rep. Rosa DeLauro (D-Conn.), would employ the same basic structure. California’s paid leave program, which has been operating successfully for about a decade, works in more or less the same way.

One advantage of this approach is that the Social Security Administration has the infrastructure to run such a program. Another is that it spreads the financing burden thinly, because every worker would be contributing. Although a national paid leave program would be expensive, most likely into the hundreds of billions of dollars, the proposed tax in the FAMILY Act would be tiny -- just 0.2 percent. (To be clear, that's zero-point-two percent -- not two percent.)

Clinton’s chief rival for the Democratic nomination, Sen. Bernie Sanders (I-Vt.), has co-sponsored the FAMILY Act and said that the benefits of paid leave -- which, according to research, include healthier kids and greater female participation in the workforce -- justify that small tax. But Clinton has said she wouldn’t raise taxes on the middle class, not even a little bit. Instead, she has indicated (through her campaign aides) that she’d finance paid leave through taxes that affect the wealthy exclusively.

The center’s new report says that’s perfectly feasible, based on international experience. Although most countries offering paid do so as a form of social insurance, and finance the benefit with a tax on all workers, a handful of countries use different models. One is Australia -- where employers, rather than an outside social insurance agency, are responsible for administering the program. The government still pays for the benefits, using general revenue sources rather than a dedicated payroll tax.

If Clinton opted for this kind of “business-government partnership,” she could stick to her pledge of avoiding new taxes on the middle class -- something that she says is important, given the financial struggles middle-class families already face. On the other hand, such a scheme would also require employers to take a more active role in running the program, since they’d be the ones cutting the checks.

The politics are also complicated. Supporters of the social insurance model for paid leave would say broad-based taxes actually strengthen programs politically, because the programs seem like earned benefits of working, rather than forms of redistribution. Others would say it’s more difficult to pass programs like paid leave -- and more difficult to elect politicians who support such programs -- when the plans entail even small increases of taxes on the middle class.

Of course, Clinton hasn’t yet announced precisely how she’d structure her program. Ultimately, the differences among different Democratic candidates over how to administer and finance paid family leave probably matter a lot less than the differences between the Democrats and the Republicans as a whole.

All three Democratic candidates, including former Maryland Gov. Martin O’Malley, have said they think paid family and medical leave should be available to all workers -- not only those lucky enough to have employers that offer it.

By contrast, only a handful of Republican candidates have even addressed the issue. Those that have, such as Sen. Marco Rubio (R-Fla.), have said they oppose paid leave guarantees -- and support, instead, modest tax breaks for companies that offer paid time off.

Such tax breaks would have little effect, according to many experts. The majority of workers still wouldn’t have access to paid leave.

Heather Boushey, the executive director and chief economist of the Washington Center for Equitable Growth -- and also an outside adviser to Clinton -- told the Huffington Post that the key point is the presidential campaign focuses on an issue "important to every family at some time, which is how to cope when a breadwinner needs some time off to care."
"While the specifics on how the financing and administration are important, these details don't negate the conclusion that this is good for families, firms and the economy," said Boushey, who co-wrote the original Center for American Progress proposal on how a paid leave program could work.

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