House Bill 11, sponsored by Representative Christine Chandler (D-Los Alamos), Senator Mimi Stewart (D-Bernalillo), and Representative Patricia Roybal Caballero (D-Bernalillo), proposes what is likely the most harmful and ill-conceived legislation of the 2025 session: New Mexico’s Paid Family and Medical Leave Act. While the sponsors frame it as a compassionate measure to assist families, the reality is that this bill threatens to devastate small businesses and the restaurant industry across New Mexico, sectors already struggling under existing economic pressures.
The bill’s mandatory payroll taxes and rigid compliance requirements risk reducing employment opportunities, suppressing wages, and increasing costs for consumers, all while creating an unsustainable government-run program.
Boiling Over
Key provisions of the bill include mandated employee and employer contributions, a state-controlled fund to distribute leave payments, and broad applicability across industries. Unfortunately, these measures fail to account for economic realities and create significant burdens for small businesses and their workers.
This legislation represents a significant overreach of government power, creates unnecessary bureaucratic burdens, and imposes heavy costs on businesses and workers alike, all in the name of a one-size-fits-all solution that is neither financially sustainable nor economically sensible.
Key provisions include:
- Mandated Contributions:
- Employees must pay 0.5% of wages, while employers with five or more employees are hit with an additional 0.4% payroll tax.
- These rates are subject to adjustment annually, creating ongoing uncertainty for businesses.
- State-Controlled Fund:
- A state-run fund is established to administer leave payments, relying on contributions from workers and businesses.
- Solvency risks are already highlighted, with potential future tax hikes looming to cover deficits.
- Uniform Application:
- The bill applies across industries and mandates compliance, eliminating flexibility and ignoring the unique challenges faced by small businesses, particularly in sectors like food service.
- Administrative Overhead:
- The Workforce Solutions Department will manage the program, adding layers of bureaucracy and costs.
The overly broad definition of “family member” within the bill introduces significant risks of misuse and administrative confusion. According to Section K(7) of the act, a “family member” includes “an individual whose close association with the applicant or the applicant’s spouse or domestic partner is the equivalent of a family relationship.” This vague provision opens the door for subjective interpretations and potential exploitation, further complicating compliance for businesses and adding to the financial and operational burdens they face.
Lessons from History
Proponents of mandated paid leave often fail to recognize the unintended consequences of such policies. The Cato Institute points out that similar mandates, like the Americans with Disabilities Act and New Mexico’s proposed Paid Family and Medical Leave Act, resulted in decreased employment opportunities for the groups they aimed to help due to increased costs and legal risks for employers. Mandated paid leave is likely to have the same effect, disproportionately impacting women and lower-wage workers. Employers, facing rising costs, will inevitably reduce hiring or limit opportunities for those perceived as higher-risk employees.
Additionally, evidence from Germany’s paid leave program shows that overly generous leave policies can discourage women from returning to the workforce. Germany’s reform to cut leave durations by half resulted in a 14% increase in women’s labor force participation within a year, demonstrating that long-term leave policies may backfire by incentivizing workforce withdrawal.
Survey data from the Cato Institute further supports this argument, revealing that while 74% of Americans initially support a federal paid family leave program, this support drops significantly when they learn about potential trade-offs. Fewer than half of respondents favored such a program if it resulted in higher taxes, reduced pay raises, or cuts to other critical government services like education and Medicare. These findings underscore the reality that mandated paid leave often comes at a high cost, both economically and socially, and fails to align with the priorities of most workers and families.
Cooking Up Chaos
From a fiscal perspective, House Bill 11’s costs are both direct and indirect. Heritage Foundation research underscores that the administrative and financial burden of government-mandated programs like the Paid Family and Medical Leave Act often forces businesses to reduce wages or cut other benefits. The Payroll taxes imposed by HB 11 are likely to suppress economic activity and drive up prices for consumers. Moreover, history suggests that mandated leave programs crowd out existing employer-provided benefits, creating a dependency on a costly and inefficient government system.
Workers also face hidden costs under HB 11. Flexible work arrangements, which many families prefer, could become less common as employers streamline benefits to meet compliance requirements. Instead of providing meaningful choice, the bill enforces a one-size-fits-all model that reduces options for workers and families.
Burnt to a Crisp
There are better ways to support families without imposing heavy-handed mandates. Policies that reduce taxes and regulations could free up resources for businesses to offer voluntary paid leave programs tailored to their employees’ needs. For example, universal savings accounts could allow workers to save for family or medical leave tax-free, providing a flexible and cost-effective alternative to a state-run program.
Additionally, promoting flexible work arrangements and part-time opportunities can meet the needs of families without the unintended consequences of rigid mandates. Expanding tax credits, such as the Earned Income Tax Credit, would further empower families without burdening businesses or taxpayers.
Put Out the Fire Before It Burns the Economy
The Southwest Public Policy Institute strongly opposes House Bill 11. This legislation prioritizes government control over economic freedom and individual choice, threatening to derail New Mexico’s economic recovery and future growth. The sponsors, Representative Christine Chandler, Senator Mimi Stewart, and Representative Patricia Roybal Caballero, undoubtedly aim to help families, but the proposed solution will only exacerbate economic inequality and harm the very groups it intends to assist.
House Bill 11’s reliance on a state-run program introduces inefficiencies and costs that the private sector is better equipped to manage. The evidence is clear: employer-led initiatives and flexible policies are more effective at addressing workforce needs without undermining economic stability. This bill’s rigid mandates, combined with its heavy financial burdens, make it an untenable solution for New Mexico’s families and businesses.
Instead of enacting harmful legislation like House Bill 11, policymakers should explore market-driven solutions that expand choice and empower both employers and employees. Rejecting this bill is essential to preserving New Mexico’s economic vitality and protecting the liberties of its citizens.
One reply on “House Bill 11: New Mexico’s Paid Family and Medical Leave Act Spells Disaster for Small Businesses”
[…] NMPFD offers a market-driven alternative to legislative initiatives like House Bill 11, the Paid Family and Medical Leave Act. HB 11 proposes mandatory payroll taxes and a state-controlled fund to administer paid leave, […]