Bipartisan Paid-Leave Plan Uses Child Tax Credit to Fund Time Off

The measure creates no employer mandate for paid family leave

Stephen Miller, CEBS By Stephen Miller, CEBS August 2, 2019
Bipartisan Paid-Leave Plan Uses Child Tax Credit to Fund Time Off

A bipartisan paid-leave plan that uses the child tax credit (CTC) to provide new parents with immediate funds to finance time off from work or to offset the cost of infant care was released for discussion July 24 by U.S. Sens. Bill Cassidy, R-La., and Kyrsten Sinema, D-Ariz. The senators also posted answers to questions about their plan.

Congress recently increased the CTC from up to $1,000 per year to up to $2,000 per year. Cassidy and Sinema's proposal would allow the parents of a newborn or recently adopted child under age 6 to accelerate their CTCs to receive $5,000 immediately and $1,500 from their CTC for the next 10 years. These funds could be used to replace income while taking leave from work or to pay for child care if parents work outside the home.

Low-income families that don't qualify for the full, refundable CTC would be able to bring forward their CTC benefit to receive the equivalent of 12 weeks' wage replacement and then receive their adjusted CTC benefit over the next 15 years.

"In many cases, the first year of [a child's] life is the most expensive for a family," Cassidy said in a statement. "This legislation addresses this, focuses resources and eases financial strain to provide a longer bonding period for the family."

A Different Approach

The plan would not reduce the future Social Security payments of those using the benefit, unlike paid-leave bills introduced by Republican senators earlier this year, and it would not require employers to offer paid-leave time, as Democratic proposals would do. The benefit would be optional, allowing parents to continue receiving their existing CTC if they preferred to do so.

"This is a common-ground solution that can pass Congress and become law," Cassidy said.

Sinema added, "Too many parents are forced to choose between losing time with a new child or taking on debt to make up for lost wages." She called the proposal an important first step that offers parents a new option to finance time off from work or to help pay for child care.

Aparna Mathur, a resident scholar for economic policy at the American Enterprise Institute, a conservative-leaning think tank in Washington, D.C., called using the CTC to fund family leave "a smart idea" and "an innovative means by which families can be guaranteed some economic security while taking time off after birth or adoption of a new child." In an online post, she wrote,  "The CTC exists precisely to help families with children. It has a minimal earned income requirement and is partly refundable, which allows families to claim cash benefits beyond their tax obligations."

She added, "Given the political divide on what constitutes a perfect policy when it comes to constructing a federal paid-leave policy, it makes sense to start with small wins and some compromises."

Others, however, are pessimistic about the proposal's chances of being enacted. "The use of tax credits could win over reluctant Republicans worried about creating an expensive new program," Politico reported, "but the lack of leave for family and medical emergencies will likely keep Democratic leaders from supporting the proposal"—despite Sinema's high-profile role in creating and promoting the plan.

[SHRM members-only toolkit: Managing Family and Medical Leave]

Competing Legislation

Paid-leave measures that have been released as proposals or introduced in Congress this year include:

  • The New Parents Act, put forward by Republicans, which allows parents to draw from Social Security for paid leave that lasts one, two or three months in exchange for delaying or reducing future Social Security benefits. Parents also could choose to keep working full time or part time and use the extra funds to pay for child care expenses.
  • The Child Rearing and Development Leave Empowerment (CRADLE) Act, which would let parents receive up to three months of paid leave by giving them the option to postpone Social Security benefits, but it would require parents to take leave from work in order to receive the benefit. Neither this measure nor the New Parents Act has any announced Democratic supporters.

A State-Law Patchwork

Several states have enacted laws that require employers to provide paid family leave to their workers. Among these, California, Connecticut and Rhode Island fund their programs through an employee payroll tax, while Massachusetts, New Jersey, New York, Oregon and Washington impose payroll taxes on employees and employers.

[Visit SHRM's resource page on paid time off.]

Related SHRM Articles:

States Impose Paid Family Leave as Congress Weighs National Policy, SHRM Online, March 2019

GOP Rolls Out 'New Parents Act' to Provide Paid Family Leave, SHRM Online, March 2019

Support for New Parents Can Keep Employees on Board, SHRM Online, March 2019

How Much Parental Leave Is Too Much?SHRM Online, February 2019



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