OLYMPIA — Gov. Jay Inslee and Washington Democratic legislative leaders announced an agreement Friday to delay the new WA Cares payroll tax on employees as they address concerns over the new long-term care program.
Friday’s move underscored the troubles facing a major Democratic policy of recent years, which lawmakers have vowed to address when the Legislature convenes next month for a 60-day session.
In a statement, Inslee said, “We need to give legislators the opportunity to make refinements” to the new program before it kicks in.
“Therefore, I am taking measures within my authority and ordering the state Employment Security Department not to collect the premiums from this program from employers before they come due in April,” Inslee said in the statement. “My actions mean that the state will not collect those funds until the Legislature sorts through these issues.”
During the pause, employers won’t incur penalties or interest for not withholding those taxes from worker wages, he added.
Approved by Democratic lawmakers and Inslee in 2019, WA Cares was intended to be the nation’s first social insurance program of its kind, helping people pay for care for themselves in old age or sickness.
To pay for that, the WA Cares Fund created a 0.58% payroll deduction on workers that was set to begin Jan. 1, 2022.
Starting in 2025, eligible beneficiaries could begin to claim up to $36,500 to help pay for things like meal delivery, assisted living or nursing care, transportation, and respite for family members providing care.
Amid a slew of criticisms, conservative activists began collecting signatures for an initiative that, if successful, could potentially gut the program.
Much of the consternation has focused on people learning that they will pay into the program but never receive any benefits.
That includes about 150,000 people working in Washington but living in another state, such as Oregon or Idaho. Others who might never receive benefits are older adults who might not get vested to receive a benefit before they retire in the next few years; people who ultimately leave to retire in another state; and military families rotating through Washington.
Democratic lawmakers have acknowledged those concerns and say they are working on proposals to address them when the Legislature gathers in January.
“Pausing the program so that it can better serve disabled veterans, military spouses, nonresidents, and near retirees will improve the program,” said House Speaker Laurie Jinkins, D-Tacoma, and Senate Majority Leader Andy Billig, D-Spokane, in the statement. “A pause will also give the Long Term Care Commission the ability to study and make recommendations about residents who move out of Washington to retire and assure that those who have opted out of the program maintain their private insurance policies.”
“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,” added Jinkins, who sponsored the bill in 2019 before she became speaker.
On top of delaying the premium, Jinkins and Billig also encouraged employers to hold off on collecting any payroll taxes for the program.
“While we cannot direct employers not to collect, we strongly encourage them to pause on collecting premiums from employees, giving us time to pass legislation extending implementation dates until next year,” they added.
There has also been concern over the inability of some people to use a one-time opt-out this year from paying into WA Cares.
By summer, private insurance companies were halting the sale of long-term care policies over concerns that Washington workers would buy — and subsequently jettison — them to avoid the payroll tax.
In a statement Friday, Rep. Joe Schmick, R-Colfax, praised the decision to delay and potentially improve the policy. But he, like other Republicans, continued to call for a repeal of the program.
“My continued preference would be for a complete repeal,” said Schmick in prepared remarks. “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.”
Proposed Initiative 1436, if passed by the Legislature, or next year by voters, would give state residents the option of opting out from the program at any time.
An exodus of people abandoning the payroll tax could then hurt the broader program’s ability to pay benefits.
Buoyed by a handful of six-figure donors, the I-1436 campaign has raised more than $600,000, according to the state Public Disclosure Commission.
To qualify the initiative, the campaign must gather roughly 325,000 valid signatures to submit to the Secretary of State’s Office by Dec. 30.
If enough signatures are gathered, the initiative first goes to lawmakers, who return to consider it during the legislative session. Lawmakers could then approve or deny I-1436. If they deny the initiative, it would go before voters in November 2022.
If lawmakers instead amend I-1436, both the amended version and the original would go before voters next fall.