Countdown to the Democrats’ new payroll tax
Why will most workers in Washington face a new payroll tax?
On July 1, 2023, most workers in Washington, including part-time and temporary workers, will begin to pay up to $0.58 per $100 of their earnings for the WA Cares Fund – a new state-run, long-term care insurance program. If you make:
- $50,000 a year, it will cost you $290 annually or $24.17 monthly.
- $75,000 a year, it will cost you $435 annually or $36.25 monthly.
- $100,000 a year, it will cost you $580 annually or $48.33 monthly.
- $125,000 a year, it will cost you $725 annually or $60.42 monthly.
- Estimate your costs and learn more about how contributions work here.
If you purchased a qualifying, private long-term care insurance plan by November 1, 2021, and applied for a permanent exemption from the WA Cares Fund, you are not subject to the new payroll tax. However, the deadline for applying for this exemption was December 31, 2022. While many Washingtonians chose this option, many others could not find a private plan in time. And many Washingtonians may not even be aware of the fact they are facing a new payroll tax.
The long-term care benefit, including access to services and supports costing up to $36,500, will not be available to qualified, eligible individuals until July 2026. Learn more about the benefits, including earning and applying for them, by visiting this webpage.
How was the new long-term care insurance program and payroll tax established?
With no House Republican votes, the new long-term care insurance program was established by the passage of House Bill 1087 in the 2019 legislative session. House Bill 1087 created the Long-Term Care Services and Supports Program to provide individuals who have paid into the program for a specified period of time with a limited lifetime benefit (up to $36,500) to assist with future long-term care costs. To pay for the new program, the legislation created a new payroll tax – one of several tax increases passed by majority party Democrats since 2019.
What House Republicans believe
- The new state-run, long-term care insurance program and its payroll tax should be repealed because they are unpopular, unfair and inadequate.
- Unpopular: Washingtonians don’t want this program. In 2021, a Senate Democrat said she hasn’t heard from any constituents who are excited about the program. In the November 2019 general election, 62.92% of Washington voters said House Bill 1087, which was designed to levy 0.58% tax on wages to fund a program for long-term healthcare services, should be repealed in Advisory Vote No. 20. Many Washingtonians purchased private plans so they could escape the state-run program.
- Unfair: A new payroll tax is unfair and financially burdensome for someone living paycheck-to-paycheck and facing high inflation. Someone could also pay into the system for the duration of his or her career and never need to use the benefit. Or, someone could pay into the system for years, move to another state to retire and never get to use the benefit.
- Inadequate: The limited $36,500 benefit, not available until July 2026, is not adequate and may give someone a false sense of security about future long-term care needs.
- There are also questions about the program’s solvency. It is possible, if not likely, that the payroll tax may need to be increased in the future – adding to the financial burdens of Washingtonians.
- In the 2023 legislative session, Rep. Peter Abbarno introduced House Bill 1011. The legislation would repeal the long-term services and supports trust program. Democrats would not even give it a public hearing.
- Nothing has been done in the 2023 legislative session to change, improve, or bring fairness to the new state-run, long-term care insurance program. It appears Democrats are content with allowing the new program and payroll tax to go into effect on July 1, 2023. There should have been a substantive policy debate in the Legislature, but Democrats were not interested in engaging on the issue.
What happened in the 2022 legislative session?
In the 2022 legislative session, the Democrats and governor knew they had major problems with the unpopular program and tax. They passed two bills that were fast-tracked to the governor’s desk. House Bill 1732 delayed implementation of the program by 18 months and moved premium collections to July 1, 2023. House Bill 1733 created four new voluntary exemptions from the program.
House Republicans introduced House Bill 1594. The legislation would have repealed the long-term services and supports trust program.
- News release (November 1, 2021): House Republicans call for repeal of Democrats’ new long-term care insurance program and payroll tax
- Op-ed (October 31, 2021): Hit the reset button on long-term care insurance mandate (Reps. Joe Schmick and Peter Abbarno/The Seattle Times)
House Republicans also introduced House Bill 1913. The legislation would have repealed the long-term care insurance program and replaced it with an optional and affordable alternative.
- News release (January 11, 2022): Stokesbary introduces legislation to repeal long-term care mandate and replace it with affordable and optional alternative
House Democrats refused to give House Bills 1594 and 1913 public hearings, so House Republicans attempted to bring the legislation to the House floor for consideration through procedural motions. House Democrats voted them down.
- News release (January 19, 2022): House Republicans to push for votes on bills to repeal and replace the long-term care insurance program
- Video: Rep. Peter Abbarno attempts to bring long-term care repeal bill to the House floor | January 19, 2022
- Video: Rep. Drew Stokesbary attempts to bring LTC repeal and replace bill to House floor | January 19, 2022
House Republicans also introduced House Bill 1742. The legislation would have reformed and created fairness in the long-term care insurance program.
Comment on House Bill 1594: Repealing the long-term services and supports trust program
The House Republican bill to repeal the new long-term care insurance program and payroll tax is House Bill 1594. You can share your views on this bill with your state lawmakers by going to this link, clicking on “Comment on this bill,” entering your address, providing your name and email address, and sharing your position and comment. Finish by clicking on “Send Comment.” This is a direct way for you to be involved in the legislative process.
Comment on House Bill 1913: Replacing the long-term services and supports trust program with affordable and optional long-term care insurance coverage
The House Republican bill to repeal the long-term care insurance program and replace it with an optional and affordable alternative is House Bill 1913. You can share your views on this bill with your state lawmakers by going to this link, clicking on “Comment on this bill,” entering your address, providing your name and email address, and sharing your position and comment. Finish by clicking on “Send Comment.”
Washingtonians said they did not want this program and tax
In the November 2019 general election, 62.92% of Washington voters said House Bill 1087, which was designed to levy 0.58% tax on wages to fund a program for long-term healthcare services, should be repealed in Advisory Vote No. 20.
News and views
What is long-term care insurance?
According to the Office of the Insurance Commissioner’s website: “Long-term care insurance helps with many medical, personal and social services for people with prolonged illnesses or disabilities. It can include home health care, adult day care, nursing home care, and group living facility care.”
Long-term care insurance is defined in RCW 48.83.020.
How long do workers have to pay into the program to receive benefits?
Vesting occurs when an individual who works a minimum of 500 hours per year pays premiums for at least ten years (without a break of five consecutive years) or for three of the previous six years from the date of application for benefits. Those who paid for ten years are permanently vested, while those who paid for three of the last six years from the date of application for benefits vest on a temporary basis and can un-vest if they no longer meet qualifications.
When can a vested individual use the benefits?
To utilize the benefits (paid in $100 stackable units), vested individuals must reside in Washington state and need assistance with a minimum of three of ten Activities of Daily Living: medication management, personal hygiene, eating, toileting, transferring, body care, bathing, ambulation/mobility, dressing, and cognitive impairment. Individuals who meet these requirements may begin applying for benefits in January 2025.
How does the tax impact self-employed individuals?
A self-employed individual can choose to opt into the program between January 2022 and January 1, 2025, or within three years of first becoming self-employed for the first time. Self-employed opt ins are irrevocable, and the payroll tax will apply as long as they are self-employed (and if they are later employed by a qualifying employer).
Does the tax impact current retirees?
The payroll tax is levied on an “individual in employment with an employer” as outlined in RCW 50B.04.080. Therefore, current retirees who have no income from an employer would not be subject to either the tax or the benefits. However, if a current retiree earns any income from an employer, he or she would pay the payroll tax on earnings and could potentially qualify for benefits in future years if eligibility criteria is met.
How does this impact individuals who live and work in different states?
Individuals who live in the state, but do not work in the state, will not be eligible for the benefits nor will they have to pay for this tax. Those who live in another state, but work in Washington, will have to pay the payroll tax but will not be eligible to receive the benefits of the program unless they later move into the state.
What is expected of employers?
Beginning Jan. 1, 2022, employers will collect premiums from employees the same way they do for Paid Leave. Employers won’t pay any share of the contributions for their employees. Information for employers can be found at this website, which include an employer toolkit. Employers can also contact ESD through this online form.
How can I learn more?
Note: The content of this webpage should not be considered or construed as legal, financial or health care services advice from the House Republicans Caucus, including its members and staff. This content is meant to be informative, including the explanation of the legislation that created and changed the Long-Term Services and Supports Trust Program and how it impacts workers, retirees and employers in Washington state.