It’s great that the push for paid family leave is now becoming a national issue. New York’s paid family leave program is the best in the country right now and should be a model. New York Senator Kirsten Gillibrand is sponsoring a bill that provides a national paid family leave program that seems closer in financing to our New York program that became effective on January 1st of this year. Gillibrand’s bill would assess a small payroll tax to fund the program.
Some Republicans in Congress have developed legislation for a paid family leave program tapping the Social Security system. Senators Marco Rubio and Mike Lee are developing a proposal that would allow younger workers to tap their Social Security benefits early to take up to 12 weeks off. This is not an ideal proposal because it would require a worker’s early benefits deducted or delayed from their retirement benefits. The proposal has drawn criticism from defenders of Social Security and Democratic leaders.
Ivanka Trump is pushing for paid family leave and the Trump budget pushes it through the unemployment insurance program.
The Wall Street Journal is editorializing this week against the GOP plan saying it opens up a new “entitlement” that will only grow bigger if it is enacted. They would rather encourage the private sector to do this. The problem with that is the benefit is only available if you are lucky enough to have an employer which offers it.
There is momentum now for the program at the national level though it seems unlikely this Congress has pass anything new beyond a tax cut. However, the wisdom of providing a more family friendly workplace is clear and the United States needs to catch up with many other countries which already have leave programs.
Governor Cuomo has indicated his desire to help state taxpayers losing the federal income tax deductibility of all their state and local tax payments above $10,000. While the intent is good to get around the discriminatory federal tax law signed in December, the details are proving to be problematic. His office is working on a plan to turn the state income tax to a state payroll tax which would be deductible under current federal law. His plan is set to be proposed to the Legislature in the coming weeks. It is all a very complicated plan but we are hearing some of the aspects of it which may negatively impact pensions and Social Security.
The payroll tax plan would result in wages being lowered as employers used the reduced wages to fund the payroll tax deposited for the workers. If a person’s gross pay is less, then they would pay less in Social Security and Medicare taxes but they would also have less annual earnings to count toward pension and Social Security benefits. Due to the structure of Social Security, most people, especially those who are lower income, get a lot more in retirement benefits than they contribute.
It is debatable whether it is worth making this change in the payroll tax because most people other than those with the highest incomes are not going to be effected by the federal limit on state tax deductibility. The Governor’s plan could negatively impact most taxpayers regarding retirement benefits while the tax swap of using the payroll tax would benefit those who have high state income taxes and property taxes. It seems like a bad swap unless it can be constructed in a way that only effects those high income earners which seems burdensome and unlikely.
The change in the gross income would also impact eligibility for a variety of other benefits and services.