Almost everyone would like to be paid while taking time off for maternity leave or to care for ill family members.
California legislators passed a new bill SB No. 951, which was signed by Governor Gavin Newsom on September 30, that expands the amount of money that workers receive for disability or family leave to 90 percent of pay checks.
The new law will replace the existing paid family leave, which provided a 60 to 70 percent wage replacement and is set to sunset January 1, 2023, to January 1, 2025.
To make this work, extra money will be needed, and the question is “where will it come from?”
No problem. The rich can cover that amount, is the thinking of many people, but unfortunately, this also hits the middle class.
Paid family leave in California, like the state’s disability insurance program, is funded through a 1.1 % tax on most workers’ paychecks.
The bill that was made law will pay for increased benefits by removing a payroll tax shield on earnings above $145,600, effectively raising the contributions from higher earners.
That will be a boost from the current program and will apply to those who make as much as $57,000 a year. The boost, outlined in SB 951, will begin in 2025, and higher earning Californians will pay for it through larger contributions from their paychecks.
The Wall Street Journal did an analysis in an editorial today, October 6, (“Gavin Newsom’s Stealth Tax Increase”) and wrote, “In 2024, California’s top marginal tax rate will increase to 14.4% from 13.3% for workers making more than $1 million.
“Those making between $61,214 and $312,686 would pay 10.4%. So, California’s upper-middle class will pay more than millionaires in almost every state save New York, New Jersey and Hawaii.”
The paper goes on to point out that under current law, the Employment Development Department can “raise the payroll tax up to 1.5 % to keep the special fund solvent.”
Is this likely? Probably.
The Employment Development Department told the Legislature in a Senate floor analysis that this would increase funding for the program, but it “would not offset the additional benefit payments over time.”
Votes for the marginal income tax are listed below:
ASSEMBLY FLOOR: 61-9, 8/22/22 AYES: Aguiar-Curry, Alvarez, Arambula, Bauer-Kahan, Bennett, Berman, Bloom, Boerner Horvath, Mia Bonta, Bryan, Calderon, Carrillo, Cervantes, Cooley, Cooper, Cunningham, Daly, Mike Fong, Friedman, Gabriel, Cristina Garcia, Eduardo Garcia, Gipson, Gray, Grayson, Haney, Holden, Irwin, Jones- SB 951 Page 11 Sawyer, Kalra, Lee, Low, Maienschein, McCarty, McKinnor, Medina, Mullin, Muratsuchi, Nazarian, O’Donnell, Petrie-Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Stone, Ting, Villapudua, Waldron, Ward, Akilah Weber, Wicks, Wilson, Wood, Rendon
NOES: Megan Dahle, Fong, Gallagher, Kiley, Lackey, Mathis, Seyarto, Smith, Voepel
NO VOTE RECORDED: Bigelow, Chen, Choi, Davies, Flora, Levine, Mayes, Nguyen, Patterson, Valladares
SENATE FLOOR: 28-9, 5/24/22 AYES: Allen, Atkins, Becker, Bradford, Cortese, Dodd, Durazo, Eggman, Glazer, Gonzalez, Hueso, Hurtado, Kamlager, Laird, Leyva, Limón, McGuire, Min, Newman, Pan, Portantino, Roth, Rubio, Skinner, Stern, Umberg, Wieckowski, Wiener
NOES: Bates, Borgeas, Dahle, Grove, Jones, Melendez, Nielsen, Ochoa Bogh, Wilk
NO VOTE RECORDED: Archuleta, Caballero, Hertzberg