Repeal punitive payroll tax

All the increased costs Washingtonians experienced during the past year were accompanied by a $1.3-billion hit on workers’ paychecks. The widespread pay decrease in Washington state was compliments of a new payroll tax that began in 2023 to fund a program called WA Cares.

In a recent meeting, the Employment Security Department told the Long-Term Security and Supports Trust Commission not to get used to higher-than-expected income, in case wage and employment information changes. But ESD’s Ibrahim Dembele seemed a bit giddy that WA Cares had more to work with than actuarialists thought it would.

Dembele told the commission, “What we are collecting is more than what we projected back in 2023. So I think that is very good news.” While $952 million was expected in the first 12 months of WA Cares’ tax collection, the amount was closer to $1.3 billion, as mentioned earlier.

That might be good news for the state, given the solvency challenges facing WA Cares, but watching the government line the pockets of a new program most voters didn’t want with wages from workers who are trying to make ends meet is not welcome news.

If workers paying into WA Cares via payroll tax meet health and vestment criteria someday, and that’s a big if, the program is supposed to help them with their long-term-care costs, should they have them. Not everyone needs long-term-care services, of course, but many do. The ones that won’t are at the top of the list of workers whose wages will have gone toward one life need they won’t have at the expense of other life needs they do have.

Many other workers who won’t qualify are lined up behind them. Health and vestment criteria ensure it. Program funding is also structured so that low-income workers will often be financing long-term care for people with more resources than they have and who aren’t in need of taxpayer assistance.

For now, most of the money is being sent to the State Investment Board for investment, with tens of millions going to administrative costs for WA Cares. Benefits from the fund won’t start being paid out until 2026 at the earliest and only for state-approved services to a minority of workers who qualify in the program’s early years.

The $36,500 lifetime benefit for long-term care will not be enough to cover most people’s long-term-care needs, and an actuarial report shows the amount of the benefit will not start growing until 2027 or after. Even then, the benefit isn’t guaranteed to rise with inflation. “Up to” inflation are keywords to pay attention to.

While some supporters of WA Cares were relieved and excited to see more income for a solvency-concerning program, I was dismayed so much money was extracted from workers in inflationary times — more than $1 billion in the first 12 months. That’s a lot of money for a program that promises too little to too few.

Voters have an opportunity to pass Initiative 2124 this fall, which would offer them a way out of the mandatory program and its payroll tax. The initiative would make WA Cares optional for all Washingtonians. If voters say “yes” to the measure, I think ESD will be offering a much different report after year two of tax collection. WA Cares is not a good bet or fit for most Washingtonians.

Lawmakers need to start discussing a repeal of this punitive payroll tax. There are more promising solutions for long-term care than taking wages from workers.

— Elizabeth New is the director of the Center for Health Care and Center for Worker Rights at the Washington Policy Center. Email her at [email protected].