Personal Finance

Trump's budget calls for six weeks' paid family leave. What it will cost you

Key Points
  • The president's proposal includes six weeks' paid leave for new mothers and fathers.
  • The plan calls for states to establish the programs.
  • Experts say such a plan, which is slated to be paid for through unemployment insurance, would result in higher taxes and uneven benefits for workers.
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President Donald Trump took one more step toward realizing paid family leave for new parents with the release of the annual budget on Monday.

But such a provision could have negative consequences for your bottom line.

Trump's proposal includes six weeks' leave for new mothers and fathers, including those who adopt, to promote time to "recover from childbirth and bond with a new child," according to the budget language.

The provision calls for states to establish leave programs based on unemployment insurance.

The president briefly mentioned the initiative in his State of the Union address last month. "Let us support working families by supporting paid family leave," Trump said in his speech.

President Trump's 1st State of the Union
President Trump's 1st State of the Union

The proposal comes as many Americans do not have access to paid family and medical leave. The federal Family and Medical Leave Act currently allows some workers to take unpaid leave. Some states have moved to address the issue with paid plans of their own, including California, New Jersey, New York and Rhode Island.

"I think it's a sign of evolution in the national dialogue that we're seeing a proposal in the budget," said Vicki Shabo, vice president for workplace policies and strategies at the National Partnership for Women & Families, a Washington, D.C.-based non-profit group.

But "the policy details matter," Shabo said, particularly the potential impact on state unemployment insurance programs. Many states don't have the reserves to withstand another recession, she said.

"The concern is the reserve funds aren't big enough to add another obligation without raising taxes," Shabo said.

Michael Strain, an economist at American Enterprise Institute, a public policy think tank, said Trump's proposal would likely involve increased payroll taxes. "That's kind of the trade off," he said.

For now, the inclusion of the plan should slow talk of funding paid leave through the Social Security system, which has been suggested by Sen. Marco Rubio, R-Florida, Strain said. Rubio will likely still introduce a bill at some point, Strain said.

For individuals, the proposal raises additional worries.

Unemployment insurance generally provides just about one-third of a person's wages per week, capping out at about $333 on average, according to Shabo.

Two groups excluded

Trump's proposal excludes two key groups who take advantage of family leave policies, namely those who are providing care to family members or who have personal medical issues. Those two groups account for 75 percent of those who take advantage of leave policies, Shabo said, citing data from the Department of Labor.

In addition, Trump's proposal provides for a six week leave. In contrast, current federal law under the Family and Medical Leave Act allows some workers to take up to 12 weeks off. Another proposal put forth by Congress, the Family and Medical Insurance Leave Act, known by the name FAMILY, also provides for a 12-week leave.

The losers as a result of such a policy would likely be women, namely those who have low incomes and are of child-bearing ages, Strain said.

For many families, there is a decline in income starting the month before a child is born and continuing until well after birth, noted Elizabeth Peters, institute fellow at Urban Institute, an economic and social policy think tank.

"This at least goes part ways to supporting families at this critical time," Peters said, noting that the U.S. and Papua New Guinea are two of the only countries with no mandated paid leave.

The question is whether a plan will be progressive, Peters said, and replace income at a higher rate for low-income families that are hit the hardest.

Still, Trump's family leave proposal could face an uphill battle, Strain said, without much support from Republican legislators.

"It's another spending program and Republicans are kind of averse to starting new entitlement programs," Strain said. "It has to be paid for somehow and certainly increasing payroll taxes is something Republicans would shy away from."

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