The D.C. Council gave final approval Tuesday to a plan that will provide private-sector workers some of the nation’s most generous family and medical leave benefits, fighting off a last-minute revolt by the city’s business establishment and Mayor Muriel E. Bowser.
To pay for it, the city will levy a new 0.62 percent payroll tax on employers small and large to generate $250 million annually, which will be distributed by a new arm of the city government.
The tax triggered an intense lobbying campaign in the past week, led by major employers in the city as well as the Greater Washington Board of Trade, the D.C. Chamber of Commerce and the Federal City Council. Those groups argued that the city should simply mandate that employers provide paid leave and allow them to decide how to finance it.
Many of the city’s large employers already offer some type of leave, and balked at the idea of also paying taxes to create a fund that would enable smaller businesses to provide similar benefits to their employees.
The bill’s passage was a coup for the council’s progressive lawmakers and its chairman, Phil Mendelson (D), a key architect. And it marked a serious setback for Bowser (D) and a further fraying of her already antagonistic relationship with Mendelson.
In a statement issued after the vote, the mayor said she would not sign the legislation but did not indicate whether she would veto it. The bill can become law even without her signature.
She also took a direct swipe at Mendelson.
“Today, Chairman Mendelson and the Council passed a $250 million tax increase to mostly benefit residents of Maryland and Virginia,” Bowser wrote, underlining the fact that two-thirds of city workers live outside the District.
“It is wrong to raise District taxes to fund a costly, new government program that sends 66 percent of the benefits outside of the city, and leaves District families behind. If the Council wants to raise $250 million in new taxes, shouldn’t the focus be on District residents and their needs?”
Some business leaders say they are groaning under the cumulative weight of workplace regulations and taxes the city is heaping on them and that a new payroll tax will drive companies from the District.
The paid-leave bill won preliminary approval from the council earlier this month. But on the eve of the final vote, it appeared to be in jeopardy, as council members Jack Evans (D-Ward 2) and Mary M. Cheh (D-Ward 3) unexpectedly announced an alternative proposal supported by Bowser and the District’s major business groups.
Their plan would have required employers to provide the same amount of leave but spared them the tax hike, and it would have offered small employers a $200-per-worker tax credit in place of government-funded benefits.
Larger employers — many of which already provide generous paid-leave benefits and would be unaffected by the mandate — had been pushing similar proposals for months. In a full-page ad in Tuesday’s editions of The Washington Post, associations representing restaurants, hotels, parking garages, universities, hospitals and other businesses wrote a letter to the council calling the “employer mandate” a “better, faster and cheaper” approach to offering universal paid leave.
Council member Kenyan R. McDuffie (D-Ward 5), who cast one of the deciding votes for the bill, struck a somber note amid the jubilation of the bill’s backers, saying he still had questions about both paid-leave proposals and that the law he ultimately chose to support would need to be refined over the next several years before being implemented.
“It’s going to be a serious tax with serious consequences to our business community,” McDuffie said. “The bottom line is, there’s going to be some serious work that needs to be done.”
Janene D. Jackson, a member of the D.C. Chamber of Commerce board, said business owners in the city would continue to oppose the bill and would call on Bowser to veto it.
“The fact that they think businesses have the bandwidth to absorb an additional tax and that this is not going to impact jobs is unbelievable,” she said. “There’s no way the D.C. business community is going to take this. This is the battle. It’s not the war.”
Mendelson had argued that an across-the-board tax was the only way of ensuring that small businesses could offer paid time off comparable to that at bigger employers.
Under the alternative bill, he said, the tax credits would not be sufficient to offset the cost of providing paid leave, which even for a single, minimum-wage employee could reach thousands of dollars a year.
“The effort to try to avoid the tax actually creates an enormous burden on small businesses,” he said.
Even if the council overrides a mayoral veto, Bowser’s cooperation will still be critical to the paid-leave program’s success, because she will be tasked with getting it off the ground. The city will have to set aside $40 million next year to begin setting up a technology system to administer the new benefits.
The paid-leave legislation was a dramatic display of momentum for the council’s progressive faction, which over the past two years has focused on fighting economic inequality through an agenda aligned with that of left-leaning Democrats across the country.
The bill was originally introduced by council members David Grosso (I-At Large) and Elissa Silverman (I-At Large), progressives who are each in their first term of office.
Debra L. Ness, president of the National Partnership for Women and Families, said in a statement that the D.C. Council “showed real leadership by providing final approval of a historic paid family and medical leave insurance fund that will benefit the District of Columbia’s workers and families, businesses of all sizes and the local economy.” Ness called on Bowser to sign the legislation.
Some of those on the council who opposed the bill were less upbeat. Council member LaRuby May (D-Ward 8) said she doubted that the poor and predominantly African American residents of the Southeast neighborhoods she represents would see much benefit from the bill, even though it is targeted specifically toward low-wage workers.
“It is amazing that we’re willing to now have an additional tax where the consolation prize of this new tax is that two-thirds of the new benefit will go to Virginia and Maryland residents,” May said.
“A ‘yes’ vote on this legislation is a ‘no’ vote to the residents of Ward 8.”
Under the plan approved by the council, the city would reimburse employees for 90 percent of their first $900 in weekly pay and 50 percent of their remaining weekly pay, with a cap of $1,000 per week. The city’s chief financial officer estimates that the city could begin offering those benefits during the 2019 fiscal year.
The benefits would not apply to federal workers, or to the 35,000 people employed by the District government.