Lawmakers delay collection of long-term care tax

OLYMPIA – Collection of the state’s new long-term care tax that had been set to go into effect in the new year will be delayed until after the legislative session.

Gov. Jay Inslee, along with Democratic leaders in the House and Senate, announced Friday they have decided to pause collection of the tax to give legislators a chance to fix issues that have received much criticism in recent months.

“This bill will help provide much-needed care and coverage for Washingtonians as they age,” Gov. Jay Inslee said of the novel program, the first of its kind in the country. “Legislators have identified some areas that need adjustments and I agree. We need to give legislators the opportunity to make refinements to the bill.”

The move means the Employment Security Department will not collect the tax from employers, who were set to begin withholding money from workers’ paychecks starting Jan. 1. Lawmakers said they strongly encourage employers to pause on collecting the money from employee paychecks in order to give them “time to pass legislation extending implementation dates until next year,” House Speaker Laurie Jinkins, D-Tacoma, and Senate Majority Leader Andy Billig, D-Spokane, said in a joint statement.

Inslee said earlier this month he did not have the authority to make an emergency declaration to delay the tax completely. Delaying it would have to come from the Legislature, which would have to be called into special session to do so.

Instead, Inslee said he was able to order the Employment Security Department not to collect the premiums for employers.

When the Legislature reconvenes in January, they will likely vote to delay the program through the 2023 legislative session.

In 2019, the Legislature passed a bill creating the program, which aims to help residents offset the cost of long-term care. The program requires workers to pay 0.58% of their wages into the fund beginning Jan. 1. Those who qualify can access the benefit – up to $36,500 – beginning in 2025. The benefit can be used on a number of services, including professional care in-home or at a facility, home safety evaluations, equipment, training for caretakers, meals or transportation.

Employees can opt out of the tax but must purchase a private long-term care insurance plan to do so.

As of Dec. 9, more than 443,000 people had opted out, according to a presentation from the Long-Term Services and Support Trust Commission. That’s about four times more than the number of people the Legislature assumed would opt out when they passed the bill, State Actuary Matt Smith told the commission.

Critics of the measure have raised concerns in recent months over the sustainability of the tax and the fact that Washington workers who live out of state pay the tax but can’t access its benefits. The state estimates that’s about 150,000 people.

Opponents are in the process of gathering signatures on an initiative to the Legislature that would overturn the parts of the law that determine eligibility and exemptions to the law. It would keep the program but allow people to opt into it, if they wish. The initiative would need to get at least 324,516 registered voters by 5 p.m. Dec. 30 to be submitted to the 2022 Legislature, who would need to either adopt it as proposed, send it to the ballot in November or approve an alternative.

Lawmakers on both sides of the aisle said it would be a priority this session.

Jinkins and Billig said pausing the tax will give lawmakers the ability to study and make recommendations about improving the program.

The Legislature will likely look at how to exclude individuals who don’t live in Washington from paying into the program, how to help people who move out of the state to retire and how to allow veterans, military spouses or temporary workers to opt out of the program.

“These improvements will provide security and stability now and into the future for this critical safety net for our state’s seniors and people with disabilities,” their statement read.

House Republicans praised the decision to pause the collection but pushed further for a total repeal.

Rep. Joe Schmick, R-Colfax, said the proposal has not garnered much public support and he’s glad the Legislature can take another look at it. Schmick, the top Republican on the Health Care and Wellness Committee, said his continued preference is a “complete repeal.”

“If that’s not politically feasible, at least we should redraft the policy and start from scratch to make it more equitable, efficient, and economically solvent so that taxpayers down the road don’t end up paying more for broken promises,” Schmick said.

Rep. Peter Abbarno, R-Centralia, called the bill “a train wreck from the very beginning.” Abbarno is sponsoring a bill that would repeal the program. He called the bill “unfair and unstable” with solvency concerns.

Advocates for the long-term care tax say the program will provide much needed relief to the many people in Washington who need long-term care but can’t afford it. AARP Washington estimates about 70% of people in Washington will need long-term care at some point, but most can’t afford it.

Advocates urged the Legislature to work quickly to improve the program.

“Without WA Cares, hundreds of thousands will be forced to drain their savings to qualify for Medicaid long-term care, costing taxpayers and the state budget,” Cathleen MacCaul, advocacy director for AARP Washington, said in a statement.