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Trey Stewart of Presque Isle is the Maine Senate Republican Leader and a member of the Legislative Council.
Maine has the third-highest tax burden in America, according to WalletHub. But that embarrassing title hasn’t stopped Democratic lawmakers and Gov. Janet Mills from trying to create an entirely new tax on small businesses and workers.
The new payroll tax Democrats want to impose would fund a paid family medical leave program; but in the process, it would make Maine less competitive, our businesses less successful, and our workers poorer.
Fortunately, there is an alternative way to give Mainers paid family medical leave without further overtaxing our businesses and workers. Look no further than neighboring New Hampshire for a truly innovative policy solution, one that Maine should follow.
New Hampshire has shown that states can provide economic security to workers during significant life events without employer mandates and new taxes. Their groundbreaking Paid Family Medical Leave Plan blends family medical leave insurance (FMLI) with business tax credits to provide a safety net for employees needing leave for personal or family health situations.
State employees form a risk pool of around 10,000, with MetLife serving as the insurance provider. Premiums are then paid voluntarily by employers and/or employees to protect against potential family or medical leave circumstances.
The program is funded with less than $2 million per year in general fund expenditures to support the risk pool managed by MetLife. This contract effectively creates a market for paid family medical leave insurance that other businesses can take advantage of voluntarily. Businesses that opt to do so work directly with an insurance provider rather than paying taxes to a state bureaucracy and hoping the program is managed competently.
The FMLI program’s cornerstone is a business tax credit, which aims to promote business engagement and offer competitively priced wage replacement benefits. These are capped at the “Social Security taxable wage maximum.” Companies participating in the program can claim a tax credit of up to 50% of the premiums they pay. Notably, only those using MetLife as their FMLI carrier are eligible for the tax credit.
FMLI provides cover for leaves due to childbirth, adoption, fostering, serious health conditions of a family member, exigencies related to foreign military deployment, or care for a service member with a serious injury or illness. It provides a minimum of six weeks of wage replacement at 60% of an employee’s average weekly wage, capped at the Social Security wage cap. The duration of the paid leave varies depending upon the sponsor, with employers given the option of a six- or 12-week plan.
This pioneering program is open to all Granite State businesses – regardless of size – and individuals if their company does not provide a similar benefit. Smaller companies and individuals can opt for payroll deductions or direct payments to MetLife for premiums. Employees whose employers do not opt to join the program can join individually for a premium that is capped at just $5 per week.
The program also includes a paid family medical leave Premium Stabilization Trust Fund backed by the normal taxes paid on premiums. This fund ensures that premiums on individuals never exceed the cap of $5 per week.
While still in its early stages, the FMLI program offers a novel solution for businesses striving to boost employee retention and provide benefits that are competitive with neighboring markets. The plan also has the benefit of avoiding the creation of a new government bureaucracy with all the extra costs and inefficiencies that often accompany it.
If the desire is just to grow government and call it a win, then the Democrats’ plan works fine. But if we want to help Maine families without further burdening our businesses and making Maine less competitive, then Maine lawmakers should support the innovative and voluntary policy option based on the New Hampshire model.
