Updated Dec. 20, 2021
It’s official: The new payroll tax to fund WA State’s long-term care program (“WA Cares Fund”), the first in the nation, will be delayed at least until spring 2022. This 0.58 flat tax, which we have been following closely since it would have the most impact on highly compensated workers, was supposed to kick in Jan. 1, 2022.
Earlier in December, WA Senate Democratic leaders sent Governor Jay Inslee a letter asking that implementation be delayed for a year – until Jan. 1, 2023 – to allow enough time to address key concerns, while expressing ongoing support of the program. Governor Inslee on Dec. 17 used his authority to call for a delay in implementation at least into spring 2022.
A key concern: Many WA-based workers, especially those that are highly paid (including via stock options and RSUs), have already applied and received an exemption from this tax by getting their own long-term care coverage by Nov. 1. So far, the AP reports that WA State has received 430,000 applications for exemptions and has approved 334,000 of these, raising concern about funding for the program. Another key issue: workers who pay the tax while in WA state do not receive any benefit if they move out of state.
In addition, the WA Senate letter noted: “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.“
Supporters of the WA Cares Fund, including senior citizen groups and care providers, strongly oppose any delay in implementation. Meanwhile, a class action lawsuit was filed last month in WA federal court by some businesses and individuals opposed to the new payroll tax. We think the most likely outcome at this point is some sort of delay in program implementation but not outright repeal.