Congressional Budget Office: Democratic paid leave bill would cost more than expected, leaving a shortfall

Democratic legislation to provide universal paid family and medical leave will wind up costing taxpayers more than expected, according to the Congressional Budget Office.

The bill, introduced Thursday by Rep. Rosa DeLauro, a Democrat from Connecticut, has a projected cost to the federal government of $547 billion over the next 10 years.

It would be partially paid for by a 0.4% increase in the payroll tax, which amounts to a middle-class tax increase since all wages in 2020 below $137,700 would be subject to the tax. But the CBO projections show the tax increase will not cover the bill’s full cost. The tax would collect only $319 billion, creating a $228 billion deficit over the next 10 years.

This shortfall would either have to be covered by additional tax increases or adding to the country’s debt, which has surpassed $23 trillion. In an email response, DeLauro did not say how she would pay for the entire bill but suggested that it would be worth the cost.

“The CBO’s analysis of the FAMILY Act confirms what we have known for years: comprehensive paid family and medical leave will help millions of workers, and our nation can absolutely afford it,” she wrote. "If Congress can enact a nearly $2 trillion tax cut for the rich and big corporations, we should also be able to invest a fraction of that to provide relief for working families."

Rep. Kevin Brady, a Texas Republican and chief author of the tax reform bill referred to by DeLauro, called on Democrats to work with Republicans to rework the plan.

“CBO’s estimate reveals that their one-size-fits-all plan turns paid family leave into a costly shell game of taxation and bureaucracy that burdens taxpayers,” Brady said in an emailed statement. "We should work together to build on the bipartisan successes we’ve already achieved that will give families and job creators the flexibility they need to balance their personal and professional needs."

Congress and the White House last December struck a deal creating paid family leave for federal workers in exchange for establishing President Trump’s Space Force. The new law provides 12 weeks of paid family leave to 2.1 million federal workers, extends a tax credit for employers that offer paid family and medical leave, and adds new flexibility to allow parents who just had a baby or adopted a child to take a withdrawal of up to $5,000 from their retirement accounts without penalty.

The payroll tax is evenly paid by employers and their workers and is the primary funding mechanism for programs like Social Security and Medicare.