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Gov. Inslee, state lawmakers in talks about delaying Washington's new payroll tax set to start in 2022

By Alec Regimbal, SeattlePI

Washington Gov. Jay Inslee. 

Washington Gov. Jay Inslee. 

John Moore/Getty Images

Washington Gov. Jay Inslee and Democratic state lawmakers are in talks about potentially delaying a payroll tax that will finance the WA Cares Fund, the state’s new long-term care benefit.

In a letter sent to the governor’s office last week, Democratic leaders in the state Senate asked Inslee to delay the tax until 2023. They said they want time to address problems with the long-term care benefit, but don’t want workers to be taxed while they do so.

“This delay will allow the legislature time during the 2022 legislative session to engage the public in a transparent, deliberative process to address concerns that have been raised with the WA Cares Fund without being limited by a premium assessment that is already in progress,” they wrote.

The tax, 0.58% of a worker’s total wages, is currently set to start on Jan. 1. That tax will fund the benefit, which allows eligible adults, starting in 2025, to access up to $36,500 for long-term care costs such as delivered meals and in-home care.

At a news conference last week, Inslee said he doesn’t have the authority to suspend collection of the tax himself, but said talks with state lawmakers about a potential delay are underway.

“I do not have the authority to take some unilateral action on that, it would take some action by the Legislature,” he said. “I am talking to legislators about other approaches that can allow them to pause, if you will, some of the actions to allow them to make refinements to the bill.”

The Legislature would need to convene for a special session before the end of the year to make a change to the bill that created the benefit, which the body passed in 2019.

But Inslee said the need for a special session could be avoided if the state can order employers to delay collecting the tax from their employees until April, which would give lawmakers time to make changes to the benefit during next year’s regular session.

“We do not collect the tax from the employee — it’s withheld by the employer — and it’s not due to the state until April,” Inslee said. “So by not seeing collections from the employer until April, it could give the Legislature time to make these refinements.”

Although, Inslee said it’s not yet clear if the state can legally command employers to delay collecting the tax from their employees.

In their letter to Inslee, Democratic leaders highlighted some of the concerns raised about the WA Cares Fund.

Chief among them is that many state workers will be forced to pay into the fund but likely won’t be able to receive benefits from it. That includes foreign workers, those who work in Washington but live in other states, and those who expect to retire soon. To receive benefits, a worker must live in Washington and must pay into the program for at least three consecutive years.

About 150,000 people who work in Washington but live in another state will begin paying into the benefit next month if the payroll tax is not delayed. Melissa Johnston is one such worker. She was one of six individuals and three businesses that filed a lawsuit opposing the payroll tax in federal court last month.   

Johnston lives in Eagle Point, Oregon, but works in Vancouver. She said in a written statement that she has no plan to retire in Washington.


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“And yet the state is requiring that I buy a long-term care insurance product that can only be used if I retire in Washington—it just doesn’t make any sense,” she wrote.

In their letter, Democratic leaders also say they want time to examine the impact that exemptions have had on the program.

“Delaying the program will give us time to analyze recent data,” they wrote. “If the long-term solvency is in doubt, we must be able to examine all options for modifying the program to ensure viability into the future. If employees in Washington are already being assessed the premium it could complicate and limit potential solutions.”

To receive an exemption, a worker had to have purchased their own long-term care insurance plan before Nov. 1. To date, 366,460 workers have received an exemption, according to the state’s Employment Security Department. Overall, the state has received 435,853 exemption applications.

In their letter, Democratic leaders said many employees who wished to receive an exemption weren’t able to purchase their own long-term care insurance plans before the deadline because of the “failure” of the private long-term care insurance market.

“This market has been unstable and unpredictable for many years and is a risk to many consumers who purchase policies that never pay out benefits,” the wrote. “Nevertheless, many employees who wished to opt out will … get assessed the 0.58% on their wages on January 1st. The Legislature should be given ample time to evaluate our options before employees get money taken out of their paychecks.”

They also said they don’t want to take more money away from state workers, who may already be struggling financially because of economic impacts wrought by the coronavirus pandemic.

“When this plan was passed in 2019, the world was a much different place,” they wrote. “As our state and nation continue to grapple with COVID-19 and support a healthy financial recovery for everyone, now is not the time to add a payroll deduction, even for a critical need.”

Information from the Associated Press was included in this report. 

Alec Regimbal is a politics reporter at SFGATE. He graduated from Western Washington University with a bachelor's degree in journalism. A Washington State native, Alec previously wrote for the Yakima Herald-Republic and Seattle Post-Intelligencer. He also spent two years as a political aide in the Washington State Legislature.