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District of Columbia Chairman Unveils Paid Leave Tax Proposal

2 min readBy: Joseph Bishop-Henchman

D.C. Council Chairman Phil Mendelson (D) yesterday released his compromise paid leave proposal, after developing it over the past several months. Key elements:

  • A 0.62 percent payroll taxA payroll tax is a tax paid on the wages and salaries of employees to finance social insurance programs like Social Security, Medicare, and unemployment insurance. Payroll taxes are social insurance taxes that comprise 24.8 percent of combined federal, state, and local government revenue, the second largest source of that combined tax revenue. on all employers in the District (except the federal and D.C. governments), beginning in 2019.
  • Employees in the District can begin to access the paid leave benefit beginning in 2020. Full-time and part-time employees will be able to receive up to 11 weeks of paid leave, at a rate of 90 percent for the first $46,000 in salary and 50 percent beyond that, up to a cap of $1,000 per week.
  • Employees could only take the leave once per year and only for new children or taking care of an ill parent or grandparent, not for their own illness.
  • The benefits would be taxed.
  • The program would not cover federal or D.C. government employees.
  • The DC Council is set to consider the measure on December 6, in a hearing from 9:30 a.m. to 11:30 a.m. in the D.C. Council chamber at 1350 Pennsylvania Avenue NW. Proponents plan to pack the chamber.
  • A draft of the bill is to be made available today.

Councilmembers David Grosso (I-At Large) and Elissa Silverman (I-At Large) had introduced a paid leave proposal earlier this year, with a more generous level of benefits and a 1 percent payroll taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. . The business community argued the tax would be too high (it’d be in addition to the 9.4 percent business tax, and low-margin businesses would be heavily impacted) and the city’s chief financial officer said the math didn’t work out. Mendelson’s compromise, which Grosso already announced he supports, jettisons paid personal leave and caps the benefit while lowering the proposed tax rate.

Federal law requires larger employers to provide at least 12 weeks of unpaid medical or family leave. Rhode Island, New Jersey, and California have adopted paid leave programs, though less generous than what D.C. is proposing, and New York has one going into effect in 2018. President-elect Trump has proposed a paid family leave program offering six weeks but opposes new taxes to fund it.

This tax is structured as a payroll tax on employers likely because a tax on employees would violate congressional restrictions on D.C.’s taxing nonresidents who work in D.C. D.C. also has strict budget rules that require new programs be fully funded by new taxes or spending reductions elsewhere.

Mayor Muriel Bowser (D) responded to the announcement to state that the proposal should make sure D.C. residents are the primary beneficiaries.