Proposed Paid Family and Medical Leave Bill Funded by Payroll Tax

The highly anticipated paid family and medical leave (PFML) bill was presented to the Democratic Caucus, kicking off what will be one of the most high-profile policies debated this session. If enacted as introduced, the program would be funded by a payroll insurance premium. 

The bill in circulation would begin debate in the House General and Housing Committee. As drafted, it contains a 0.58% payroll tax split between employer and employee, an opt-in 58% payroll tax option for self-employed individuals and a significant $20 million in general funding to set up the administration of the program. A paid family leave bill that was passed but ultimately vetoed in 2019 would have implemented a 0.93% payroll tax.  

In addition to parental bonding leave and time spent caring for a family member or personal health issues, the bill covers various other types of leave including military deployment and trauma recovery from interpersonal violence. The proposed legislation would provide up to 12 weeks of complete wage replacement and job protection for all workers, including part-time, seasonal, and self-employed, and would allow employers to opt-out if they provide coverage of equal or more significant value.   

An alternative plan announced by the Governor’s Office in December would be administered by a private insurer with a cost to $2 million annually to cover state employees. This plan would allow businesses to opt-in, and would not require a statewide payroll tax. The plan would offer 60% wage replacement for up to six weeks.  

The Vermont Chamber will be advocating for legislative leaders to consider the cumulative tax impact of their proposals this session. In particular, the long-awaited childcare financing study is due to be released next week and is anticipated to include an additional payroll tax. In recent days legislative leaders have appeared hesitant at the prospect of both paid family and medical leave and childcare being passed this session.