Cassidy, Sinema Release Family Leave Plan

America the only industrialized country without PFL

Bill Cassidy / Getty Images
July 31, 2019

Sens. Bill Cassidy (R., La.) and Kyrsten Sinema (D., Ariz.) floated a proposal Tuesday to bring paid family leave to the United States, offering the fourth such proposal in the Senate this term.

Cassidy and Sinema's PFL proposal would allow new parents—of either natural-born or adopted children—to draw on their entitlements under the child tax credit (CTC), which was increased to $2,000 per year under 2017's Tax Cuts and Jobs Act. Specifically, parents could "bring forward" up to $5,000 of their future CTC. They would then pay off this interest-free "loan" by accepting a reduced credit of $1,500 per year for the following 10 years. This design allows parents to replace income they would lose by going on family leave, putting money in their pockets when it's most needed.

"There is no bigger kitchen table issue than a mother and a father being able to care for their newborn," Cassidy said. "In many cases, the first year of life is the most expensive for a family. This legislation addresses this, focuses resources and eases financial strain to provide a longer bonding period for the family."

If implemented, a PFL proposal like Cassidy and Sinema's would help the United States catch up to the rest of the world—the U.S. is one of just eight nations, and the only industrialized one, not to require some kind of paid maternity leave. Just 17 percent of Americans have any kind of paid leave plan, even though leave is linked to better child-mother bonding, smoother re-entry into the workforce, and even more breastfeeding. While Americans are legally entitled to 12 weeks of unpaid leave under the Family Medical Leave Act, many choose not to take it, as they are unable to compensate for the lost income.

The lack of PFL is one of just many ways that parenting in America has grown harder and harder in recent years. Fertility cratered after the Great Recession and has failed to recover. That phenomenon may be linked to increasing childrearing costs, which have in turn been shown to be a major determinant in parents' happiness. Childbearing is a major determinant of poverty—not only do 15.6 percent of kids live in poverty, but roughly half of parents in poverty would not be there if they were not parents.

Responding to this reality is part of what has prompted efforts on both sides of the aisle to create a federal PFL benefit. Democrats have generally backed the FAMILY Act, which would replace up to 66 percent of earnings for three months by raising the payroll tax. On the right are two competing proposals, one from Sens. Marco Rubio (Fla.) and Mitt Romney (Utah) and one from Sens. Joni Ernst (Iowa) and Mike Lee (Utah). Both of those plans allow new parents to draw their Social Security entitlements early, repaying them by delaying retirement or taking smaller retirement payments.

The Sinema-Cassidy plan is the only bipartisan plan out there, and also the only one to promise parents who make above a certain income threshold a lump sum payment (as opposed to some share of their pre-childbirth income). But the plan also imposes its repayment burden sooner than either of the other Republican plans; beneficiaries will be forced to take a hit on their taxes when they still have relatively young children, as opposed to when they are near retirement, at the peak of their earning power.

Further, that "income threshold" caveat is important: Not all parents would be eligible for the full $5,000. On the low end, parents need an earned income of at least $2,500 to qualify for the credit at all. (Such income constraints are also relevant to the other proposals, which replace percentages of pre-childbirth income.) Recipients also need to have a legal social security number, i.e. not be unauthorized residents.

Then there is the thorny issue of the CTC's de facto phase-in. Because the CTC is a tax credit, it applies against a person's tax liability, meaning that if you owe less than $12,000 in taxes, you can't claim the full credit. This creates a situation where low-earning families would be taking a $5,000 advance against a diminished CTC, such that the $500 per year repayment would consume a significant chunk of their subsequent CTC entitlement.

To fix this, Cassidy and Sinema propose to allow below-threshold earners to advance an amount equivalent to 100 percent of their earnings over the three months of leave they are entitled. This reduces the "principle," which they then repay with a diminished CTC. They would also be allowed to distribute those repayments over 15 years, rather than ten, lowering the annual reduction to their CTC.

At the same time, the linking of the PFL to income thresholds, and thereby work—in the Cassidy-Sinema plan, but also in other plans—highlights one of the major limits of paid leave as a pro-family policy. While PFL does make it easier for parents to stay home for the first three months of a child's life, it represents only a minor tweak to the broader parenting experience. Such policies make small enough payments that they are unlikely to affect fertility, and do not transfer enough wealth over enough time to offset the costs of parenting or its poverty-driving effects.

While Republicans have come to agree on the need for more pro-family policy, PFL represents only a small first step. It remains to be seen whether a bipartisan approach to a broader child benefit, such as the one found in the Democrat-backed American Family Act, can be found.