New Hampshire lawmakers are inching closer to approving a family and medical leave insurance program, and they’re doing it without adopting Gov. Chris Sununu’s proposal to team up with Vermont on a public-private partnership.
The version advanced this week by the New Hampshire House of Representatives drew accusations from critics that it may be unconstitutional and that it represents the imposition of the state’s first income taxes.
Defenders argued that it was long past time to get something done on the issue and that a payroll deduction is distinct enough from an income tax that the Granite State will retain its status as one of only a handful of states without an income tax.
House Bill 712, if it becomes law, will allow workers to take up to 12 weeks off of work and be paid 60 percent of their regular wages, up to a cap of $850. The source of those funds will be a payroll deduction of one half of one percent, paid either by the employer or the employee.
The planned program contrasts sharply with Sununu’s proposed Twin States Voluntary Leave Plan, which seeks to create a pool of state workers in New Hampshire and Vermont large enough to appeal to private insurers, thereby creating low enough rates for private companies to also take part.
During floor debate on HB712, several Republican legislators argued that if the bill becomes law, they will have created New Hampshire’s first income tax.
“The funding mechanism is an income tax,” said Rep. Jack Flanagan, R-Brookline. “I mean, some people would like to say it's a payroll deduction. Okay. But it is truly an income tax, and currently it's at one half of 1 percent, paid by the employee, unless the employer is willing to pay on their behalf.”
Flanagan also argued that by treating private and public employees differently, the bill creates a number of constitutional issues, and that because general fund dollars are to be used to get the program started, there is a risk to taxpayers if the financial balance hasn’t been worked out properly.
Rep. Brian Sullivan, D-Grantham, accused Flanagan of misunderstanding or misconstruing the legislation, saying that any funds withdrawn from the general fund would be replaced in full as the payroll deduction from workers goes into effect.
Sullivan evoked one of the central tenets of Sununu’s proposal, the public-private partnership aspect, by arguing that HB712 could similarly evolve into a program that’s more than simply government-run.
“This is an opportunity for a true public-private partnership, if the commissioner can find a third party administrator that can administer the program for less money than it would cost for the Department of Employment Security to administer it,” he said. “So it'll be a public-private partnership if it saves money.”
The debate over whether the legislation constitutes an income tax didn’t show any signs of abating after HB712 was advanced on a 199-133 vote, largely along party lines. Greg Moore, director of the New Hampshire chapter of Americans For Prosperity, argued Thursday that the difference between an income tax and a payroll deduction was mere “nuance” and not meaningful to taxpayers.
“Anyone who has [ever] owned a business knows how this is going to go,” Moore wrote on Twitter. “It’s going to come out of wages, since the bill offered no tax deductibility to the employer. Now, if the bill had allowed it as a writedown against state business taxes, employers would bite.”
The bill was referred to the House Finance Committee for further consideration.