President Biden will reportedly use address to Congress tonight to tout his American Families Plan, a major part of which is paid family leave. Biden has been fuzzy on how the leave will be paid for, perhaps because it is based on an idea to create a new tax on workers.
The White House’s plan is to provide workers with “up to $4,000 a month, with a minimum of two-thirds of average weekly wages replaced, rising to 80 percent for the lowest wage workers. We estimate this program will cost $225 billion over a decade.” That’s a lot of money. Where would it come from?
Most news sources indicate that the leave plan is based on the Family and Medical Insurance Leave (or FAMILY) Act, sponsored by New York Sen. Kristen Gillibrand and Connecticut Rep. Rosa DeLauro. Both versions of the bill would cap the benefit at $4,000 month. It would be funded by new payroll taxes, jointly paid by workers and employers and administered through a federal Office of Paid Family and Medical Leave. Workers and employers would each pay 0.2 percent of the worker’s wages into a fund created for the leave program.
All workers would pay into the fund. The median weekly wage for the average American is just under $1,000 a week, according to the Labor Department, so the DeLauro/Gillibrand proposal would cost most workers $20 a week and more than $1,000 a year.
Will Biden’s plan copy this? The White House has been quick to claim that its plan is to only raise taxes on the wealthiest earners. “Biden and White House officials have been adamant that their tax hikes would not hit anyone earning under $400,000 per year,” The Washington Post reported. But is the administration only talking about incomes taxes when they say that and putting payroll taxes in a separate category? If that is the case, the workers could facing a whole new tax.