WA Cares Fund - new payroll tax coming soon!

Dear Neighbor,

As Washington State reopens its doors fully again, I thought it appropriate to send a short update on the state of our economy, the job market, and the impending payroll tax for long-term care known as the Washington Cares Fund.

How did Washington’s economy weather the pandemic?

According to the Washington State Employment Security Department, we lost 420,400 jobs from February 2020 through May 2020.  During the height of the shutdowns, we saw the unemployment rate hit a high of 16.3%. Since then, we’ve added 238,100 jobs and our unemployment rate is tracking lower than the U.S.  average.

Unemployment rates in Washington state

Additionally, just since March, monthly revenue collections had come in about 10% higher than forecast, adding over $600 million more revenue than expected in the last three months. This means the state’s general fund revenue growth from July 2019 to June 2021 is $7 billion or roughly 15%! This is incredible growth considering the state lockdowns over the last year. This good news also applies to local economies right here in the 25^th legislative District. The city of Puyallup, for example, projects revenues for the year to come in about $1.1 million higher than projected.

Looking for employment?

Starting the week of July 4, those receiving unemployment benefits will be required to look for work and document at least three approved job search activities each week in order to maintain eligibility for benefits. Prior to COVID, this was the norm. The governor waived it during the shutdowns and is now removing the waiver.

The good news is there are many job opportunities available, and I am very encouraged to see so many businesses locally who are ready to provide that next opportunity. If you or someone you know is looking for employment, Washington Work Source is an excellent resource and can help with finding employment or employees.

WA CARES Fund (Upcoming Payroll Tax) – what you need to know

I recently heard from many of you regarding the payroll tax that will be implemented next year to fund long-term care. I know many of you have questions and concerns regarding this new tax so I wanted to provide you with background information on this topic and what’s coming next.

In 2019, the legislature passed HB1087 which created the WA Cares Fund. Under this bill, most Washingtonians, those who are W-2 earners, would receive $36,500 for long term care. This will be funded by a mandatory payroll tax of 58 cents for every $100 of income starting in 2022.  This is on top of all the other state and federal taxes workers already pay. 

I, and most of my Republican colleagues, did not support this bill for several reasons. Mainly, the private market is better situated to provide this service. It is more responsive to individual needs and can provide the service with less cost. Next, this bill really does very little to assist those needing care. If you have a friend or loved one receiving long-term care, you know very well that $36.5k doesn’t go very far. For those needing care, this is akin to putting a band aid on a bullet hole. Finally, before the bill even passed, everyone knew the amount of the payroll deduction will need to increase in future years as the current contribution rate will likely fall short of funding this program. So, we can all expect that 58-cent tax to go up over time.

If you would like more information on private long-term care insurance companies approved to sell in Washington state, check out the Office of Insurance Commissioner’s website. Additionally, based on the feedback my office has received, I have provided the following Q&A below to help answer your questions and will be sending out more information as we get closer to the reporting dates. Please do not hesitate to contact my office if you have any questions or concerns.

Sincerely,

Chris Gildon

Senator, 25 LD

Deputy Floor Leader

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What is the amount of the payroll tax?

• Long-Term Services and Supports Trust Program will be publicly funded by a 0.58% payroll tax on all wages and compensation, withheld quarterly by employers.

Is there a cap on the amount of wages that are taxed?

• No, there is no cap on wages. All wages, including stock-based compensation, bonuses, paid time off, and severance pay, are subject to the tax. For example, an employee with wages of $65,000 will pay $377 toward the Program each year while an employee with wages of $250,000 will pay $1,450 toward the Program each year.

Can the payroll tax increase?

• There is no guarantee that the payroll tax will remain fixed. The law sets the tax rate at 0.58% initially but there is a high possibility that it could increase in future years.

How can I get an exemption from paying the tax? 

• Individuals can apply for an exemption if they are over the age of 18 and attest that they have long-term care insurance purchased before November 1, 2021. Individuals must apply for an exemption through the ESD, which will only accept applications beginning on October 1, 2021 through December 31, 2022. No applications will be accepted after December 31, 2022. (ESD is working on the exemption form at this time).
• If an exemption is approved, individuals will not be required to pay taxes to fund the Program and will be ineligible for benefits under the Program. In addition, employers will not be required to take payroll deductions for these individuals.
• Exempted employees are required to provide written notification to all current and future employers to notify them of their exemptions. Exemptions will take effect on the first day of the quarter after the exemption is approved and employees cannot receive refunds for premiums paid prior to the exemption.

If I move out of Washington after paying this tax, does the benefit follow me or can I get a refund?

• Unlike private insurance this benefit is not portable and has no cash value. So, if you move out of state after paying this tax, it will not follow you and you are not entitled to a refund.

How did this tax sneak up on me without warning even though it was passed two years ago?

• That’s a great question! Unfortunately, proponents of this legislation are hoping it goes under the radar until it is implemented to maximize contributions to the WA Cares Fund. To keep you updated, I encourage you to subscribe to my e-newsletter updates – which many of you have -- and follow the Senate Republican Caucus on Facebook and Twitter. We will do our best to keep you updated on what’s happening in Olympia.

16-17 year-olds

My child is 16 or 17 and has a job, do they pay into the WA Cares Fund?

• Yes, if they have a W-2, they will pay into the program unless they get an exemption.

My child turns 18 in February 2022, they are wishing to be exempt, is there way for them to get an exemption?

• No, they are automatically enrolled in the program if they are working.