As an employer, I care deeply about my employees. I value their contribution to our organization, and I appreciate their professionalism. Equally important, I sympathize with them when they face difficult personal situations like providing care for a loved one. Like most employers, I want to support the hard-working men and women whom I have the honor of calling employees with a generous benefits package that helps navigate those instances.
Proponents of Proposition 118 claim this measure would do just that by implementing a state-run paid family and medical leave program. They are wrong. This measure is not the panacea they pretend. Instead, this measure promises higher taxes, more bureaucracy and a lavish new program destined for bankruptcy.
If passed, Proposition 118 would implement a $1.3 billion, state-run family and medical leave program. To fund the program, the measure requires employers and employees to pay a 0.9% “payroll premium,” or tax directly from employee wages — like a FICA tax. While 0.9% does not sound significant, it’s more than a 20% increase in payroll taxes.
Consider an employee who makes $75,000 per year. The new tax amounts to $675 split between the employee and employer. But that’s only the beginning.
Proposition 118 sets up a new department in state government to administer the program. The measure grants a political appointee the power to raise the payroll premium — or tax — up to 1.2%. An increase from 0.9% to 1.2% would represent a whopping 15% tax increase for the employee alone, and this is on top of the initial 20% increase.
If the cost to employees is not compelling enough, consider the cost to employers. According to an analysis from the non-partisan Common Sense Institute (CSI), the 2019 corporate income tax net collections on businesses was $655 million. In 2025, the total premiums to be paid by employers could total over $1.34 billion. This would be an effective increase of the corporate income tax of 204%.
Consider a company that has 200 employees, wants to offer its employees a 100% wage replacement rate and has margin of 15%. The company will see its margin decrease by 2.4% after paying an additional $545 per employee in net costs if it only needs to replace 50% of workers on leave.
Finally, and perhaps most troubling is the long-term financial stability of this program. The CSI analysis finds that the new program will be insolvent almost from day one. If the program starts at a claims rate of 6.2% and an average length of leave of 9.5 weeks, the 2023 premium collections will not be sufficient to cover benefit and administrative costs in the first year of the program in 2024. The legislature would be faced with the difficult decision to either raise taxes, lower benefits or allow the new Paid Family and Medical Leave Enterprise to issue revenue bonds.
In short, this measure sets up a new state bureaucracy, makes empty promises and saddles Coloradans with a huge, new tax bill we simply can’t afford.
At a time when Coloradans are struggling to overcome the impacts of a global pandemic, and the energy industry is fighting for its very survival, our economy is ravaged. This is not the time to experiment with costly programs and false assurances.
Join me and vote “no” on Proposition 118. We can do better and our employees deserve it.
Dave Davia is the CEO & executive vice president of Rocky Mountain Mechanical Contractors Association.