Steve Marchand: Payroll tax is key to paid family and medical leave benefit that works

  • Former Portsmouth Mayor Steve Marchand speaks to the media after participating in a Democratic gubernatorial debate against former state senator Molly Kelly on Sept. 4 in Goffstown. AP

For the Monitor
Published: 1/20/2019 12:10:15 AM

Virtually every country in the world, and a growing number of states, recognizes the need for a quality paid family and medical leave (PFML) benefit in the modern world. The vast majority of New Hampshirites support our state creating a PFML benefit, as well.

Gov. Chris Sununu wants the people of New Hampshire to believe he supports a PFML program and that a sustainable program can be created without doing what every other state with it has done – pay for it.

While some details are yet to be unveiled, we know that the Sununu plan is voluntary. It opens itself to adverse selection, where the people most likely to buy into the program are those most likely to use it in the near future. This threatens its sustainability.

We also know his estimate of how much this will cost employers and individuals to start: About a dollar a day per employee for employers with 100 percent participation, more than a dollar a day for employers with partial participation and still more per day for individuals.

Gov. Sununu says this is not an income tax, or a payroll tax, because it is not mandatory – but it is far more expensive per participant than a plan that would include everybody, like other states have done. Based on today’s announcement, the cost per employee making the median state income will be at least six-tenths of a percent of their income; for individuals, it would be the equivalent of at least 1 percent of their pre-tax income. For individuals making below the median annual income of $65,000, this would be a cost far higher than 1 percent of their pre-tax income – indeed, prohibitive enough that they would likely not buy into the program, making them no better off than they are today.

This is the point. If you give birth to or adopt a child, or you have a long-term family illness, or you must deal with an end-of-life family situation, you should not have to game out whether the Sununu plan works for you. For everything from Social Security and Medicare at the federal level, to unemployment insurance at the state level, to PFML in most states and countries, the way to build a successful, sustainable and fair component to the social safety net is the same: a payroll tax.

The plan I proposed over the past few years would create a funding mechanism of a payroll deduction of about nine-hundredths of 1 percent – less than one-tenth of 1 percent and a small fraction of the chunk of your income the Sununu plan would take – to provide a sustainable PFML benefit available to all eligible residents of New Hampshire.

Instead of costing residents $1 to $2 per day, it would cost the median New Hampshire income earner about $1 a week. It can do this because it is a wide base of payers at a very low rate, and it eliminates adverse selection.

Doing something like this in New Hampshire means we have to be honest about something that should be obvious, but apparently is not: Things – roads, schools, public safety, the social safety net – are not free. We have to figure out the most efficient, sustainable way to achieve important goals, including paying for them. For too long, we have conflated being frugal with being cheap, and on the subject of PFML – an idea whose time is well past due for New Hampshire – we are being cheap.

(Steve Marchand is a former mayor of Portsmouth and Democratic candidate for governor.)

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