Dear Neighbor,
I have recently heard from some of you regarding the payroll tax to fund long-term care that will be implemented next year. I know many of you have questions and concerns regarding this new tax so I wanted to provide you with information based on some of the questions I have received.
In 2019, the legislature passed a bill (which my Republican colleagues and I did not support) that created the Long-Term Services and Supports Trust Program through a new payroll tax to provide care for individuals who are in need of assistance with daily living. This legislation will require most Washington employees (those who receive a W2) to be taxed 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. The maximum benefit an individual can receive is $36,500 – anyone with a relative living in a nursing home knows this doesn’t go very far.
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,
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Q&A
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?
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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 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 employees 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.
16 and 17 year-olds
My child is 16 or 17 and has a job, do they pay into the WA Cares Fund?
- Yes, they have a W-2 and will pay into the program.
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.
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