Maine’s Republican Senators on Wednesday defended their opposition to an effort by Democratic lawmakers to create a new one percent payroll tax on Maine workers in order to fund a mandatory paid family and medical leave program.
In a vote that fell strictly along party lines, Senate Democrats approved the plan, setting up a future vote in the House of Representatives.
The plan would cost taxpayers more than $360 million per year in taxed wages by 2026, according to the fiscal note estimate for the bill. That money would be used to create new government positions at the Maine Department of Labor to write rules and oversee a third-party contractor to manage the benefits fund.
Earlier this year, after Sen. Mattie Daughtry (D-Cumberland) unveiled the Democratic plan, Gov. Janet Mills’ reaction was lukewarm. Her advisors laid out several changes she would like to see in the bill, and only some of those changes made it into the version the Senate just approved.
The Maine Republican Party reacted to the vote with an email blast drawing attention to Gov. Mills’ 2022 campaign promise to avoid raising taxes.
“We’re writing to remind you that during the 2022 campaign, Janet Mills pledged not to raise taxes,” Maine GOP Executive Director Jason Savage said in the email.
“In addition, every legislative Democrat that votes for this policy will vote for a tax increase on working Mainers,” Savage said.
While Republicans have said they are interested in developing a program that allows workers to have paid leave for medical and familial reasons, they’ve rejected the creation of a new tax on workers to pay for it. They also said that a voluntary program would be preferable to one that places new mandates on businesses and workers.
Senate Minority Leader Trey Stewart (R-Aroostook) proposed in an op-ed for the Bangor newspaper that Maine consider New Hampshire’s recently adopted paid leave model, which is voluntary and didn’t require the creation of a new tax.
“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,” Stewart said.
“Fortunately, there is an alternative way to give Mainers paid family medical leave without further overtaxing our businesses and workers,” he said.
A 2023 study by financial firm WalletHub found that Maine already has the 3rd highest tax burden in the country.
Sen. Matt Pouliot (R-Kennebec) said the plan currently under consideration by lawmakers is “unreasonable,” and he urged a more modest approach, also pointing to New Hampshire’s model.
The New Hampshire model costs less than $2 million in General Fund expenses. That money was used to establish a risk pool comprised of state workers and thereby create a market for paid family and medical leave insurance that businesses can choose to join.
Pouliot also challenged the narrative that Republicans who don’t support the new payroll tax therefore don’t support paid leave for Maine workers.
“So to make the assertion that we don’t care about people having the time to spend with loved ones, in some of these circumstances, is just not true,” Pouliot said.
“A compromise that’s pulled forward or said to be a compromise in this approach is a negotiation among a more progressive contingent with a less progressive contingent, not representative of the full body of the Legislature,” he said.
Pouliot also said the pending referendum question that would allow voters to implement a similar policy at the ballot box this fall was like a “gun to the head” of lawmakers.
Creating a mandatory paid leave program, and the new one percent payroll tax to fund it, has been a priority for Democrats since the last legislative session, when lawmakers created a commission to examine how Maine might implement a policy.
The plan currently under consideration is Sen. Daughtry’s LD 1964, the bill that emerged from that study commission’s work.
Money from the new tax would enter a fund that will be administered by a 3rd party contractor hired by the Department of Labor. The Department of Labor would also have broad rule-making authority to determine how the program would be implemented and operate, so much of the specifics of the program will only be determined after the bill is implemented.
Under the bill, workers would receive compensation from the fund when taking medical or family leave to replace compensation they would have received by remaining at work. Employers would be prevented from retaliating against employees who take leave and would have to guarantee employees a return to work within 12 weeks.
The state would begin collecting the new taxes on Jan. 1, 2025, but the program would not take effect until the following year.
In addition to creating a new payroll tax, the bill would require more than $71 million in general fund expenditures, according to the bill’s fiscal note, in order for the Department of Labor to get it started. That money remains to be appropriated.
Mills has been more receptive than some Democratic lawmakers to concerns from Maine’s business groups about the cost of the proposed program. She has not said affirmatively whether she’ll sign the version of the bill the Senate approved Wednesday.
When the bill received a committee hearing, Elise Baldacci, Mills’ Deputy Chief of Staff, testified neither for nor against. She laid out a series of changes the bill would need before it earned Mills’ backing.
In her testimony, Baldacci pointed toward Vermont and New Hampshire’s voluntary models as alternatives to Daughtry’s proposal, which would mandate participation by most Maine workers.
Among the Mills administration’s more specific requests were an improved exemption for small businesses, revised benefit qualifications, and less generous benefits.
Mills wanted employees to be eligible for paid leave only after they’ve been with one employer for at least 120 days — a change that was reflected in the amended version of the bill.
Mills also asked for the legislation to come with an embedded incentive for an on-leave employee to return to work, meaning a lower replacement wage — another request that was accommodated in an amendment.
Lastly, Mills’ office asked lawmakers to create an exemption for large companies that already offer more generous paid leave. This would, in theory, allow employees to benefit from the more generous private plan without punishing the company with higher taxes.
The amended version of the bill includes provisions that allow employers with paid leave programs that offer the same minimum benefits to forgo paying the payroll tax. But the bill delegates responsibility for rulemaking around what a permissible private plan would look like to the Department of Labor. So details of that exemption, as with much of the bill, will only become apparent once the state begins rulemaking.
The bill has a few more legislative hurdles to clear before it lands on Mills’ desk, but it’s likely she’ll have something to sign by the end of the week.
Why not use the NH model? Because the democrats in Augusta lack the ability to think outside the box. For too long, their ‘go to’ response has been to raise taxes on hard working Mainers. Finally, people are paying attention and becoming aware of the dems ineptitude. Even in blue areas, such as York County, it’s time for Marc Malon, Henry Ingwersen, Maggie O’Neill and Donna Bailey to realize their allegiance belongs to voting taxpayers and not the democratic leadership.
The Bill calls for a 1% tax on wages paid to all employees in the state of Maine. That’s not enough to support the plan and they know it. The Bill also establishes a system that can raise taxes without further approval of any kind. The tax will need to be nearer to 20% of wages to pay the bill.