Tax law encourages companies to offer more family-leave to lower-paid workers

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A new provision included in the 2017 tax reform bill offers companies a tax credit for providing lower-wage earners paid family medical and leave.

But several employment experts told Kaiser Health News the credit will benefit large corporations for existing policies, rather than encouraging smaller companies to adopt expanded leave programs.

Proposed by Sen. Deb Fischer (R-NE), the credit is available to companies that offer at least two weeks of paid family or medical leave to workers who earn less than $72,000 annually. They must pay those workers at least half their salary while on leave.

In an op-ed promoting her bill, Fischer said the proposal was designed to help those employed by “mom-and-pop businesses” who may not have access to leave under the Family and Medical Leave Act. It is tailored to part-time workers, she wrote.

The tax credit starts at 12.5% and increases on a sliding scale up to 25% depending on pay given during the leave period.

Aparna Mathur, a resident scholar in economic policy studies at the American Enterprise Institute, says the new tax credit is a good strategic move by Republicans, who are typically opposed to mandated leave policies. The tax credit, only available through 2019,  also targets lower-wage workers who are most likely to be without leave.

“Providing this benefit is a huge cost for employers,” Mathur told Kaiser. “It's unlikely that any new companies will jump on board just because they have a 12.5 to 25 percent offset.”

Vicki Shabo, vice president for workplace policies and strategies at the National Partnership for Women & Families, said the provision would primarily help companies already offering paid family leave.