The Chamber is recommending a ‘no’ vote on State Proposition 118, Paid Family and Medical Leave. This would be a major new $1.3 billion state-run insurance benefit program.
Proposition 118:
- Provides up to 12 – 16 weeks of paid time off would be provided to workers to care for a new baby, care of an adopted child, to care for a seriously ill relative, or to recover from an illness.
- The program is not free; it would be paid for through a mandatory payroll tax. Both employers and employees would each ‘contribute’ 0.45% of the employee’s wage, 0.9% combined. This is the initial premium level, but it can grow to 1.2%. Mandatory payroll deductions would begin January 2023. According to the Common Sense Institute, this is an effect income tax increase of 10% to 18%. Initially, companies with 10 or fewer employees would be exempt. Local governments and school districts could opt out.
- The benefits are very rich with 90 percent wage replacement.
- Employees would retain their health care benefits while on leave and their jobs are guaranteed.
A few concerns:
- One of the major concerns is the solvency of the program. Some opponents of Prop 118 believe the usage estimates are too low and claims will quickly outstrip receipts from ‘premiums.’
- Employers carry a double burden: paying the mandatory payroll ‘premium’ (tax) and paying someone else to get the work done on a temporary basis while an employee is on leave.
- It’s being deceptively presented as a ‘payroll premium.’ No, it’s a tax on income and a significant increase at that.
- This is a disincentive to hire people. Employers have been battered by the government shutdown of the economy due to Covid-19. Adding more costs to their operations is not at all helpful.
Here’s a synopsis of Prop 118 by the Common Sense Institute. And if you want a more detailed perspective with both pros and cons head over to Ballotpedia here.
The concept of family and medical leave is fine, and I’m not arguing against it. We oppose mandates on business.