484,704 Washingtonians Say - “No Way” to the LTC Tax

The State of Washington was the first state in the nation to institute the LTC Tax. The tax will cost working people in the state an uncapped 0.58 percent employee-paid payroll tax (which calculates to $580 for every $100,000 in income) to pay for a minimal benefit intended to pay for your future long-term care.

The Washington State Employment Security Department says 484,704 people filed their exemption paperwork because they own private Long-Term Care Insurance. Nearly 482,000 of those petitions were granted. Some still need to be processed.

Elizabeth Hovde, the policy analyst and Director of the Centers for Health Care and Worker Rights, says she expects more people to file for their exemption from the "short-sighted, burdensome and unfair long-term-care law and the mandatory social program it created."

State Controlled LTC Fund

The Washington Care Fund offers a relatively meager long-term care benefit. The primary purpose is to fund the state's Medicaid program. Many people in Washington decided they could better prepare for their own long-term health care with private LTC Insurance. Long-Term Care Insurance will provide substantially more long-term care benefits, and those with a policy also avoid the tax.

Hovde says the state thinks they know better than the public.

The law has the state telling people which life needs they can save for and then deciding how to invest their savings for them. Worse, not all of the workers who pay in for 10 years or more will see a return on their investment.

Hovde says the state plan has many flaws, in addition to the cost.

Move out of the state? No Washington Cares money for you. Take a break of five years or more in your career years to raise kids or give care to a family member? You've been voted off the Washington Cares island. Don't meet health qualifications decided by the state? Parting from your income unnecessarily is such sweet sorrow.

A new payroll tax collection will begin in July 2023 for the vast majority of W-2 workers. That comes after the tax, which the Legislature imposed a year ago, was delayed for 18 months. The state will start deducting 58 cents from every $100 a worker earns in Washington.

Washington Cares Provides Little for Long-Term Health Care

The need for long-term health care is a real risk, and the costs are substantial. But Hovde points out that this has been one of the problems with the Washington Cares Fund (LTCTax) from the start. 

The inadequate lifetime benefit of $36,500 (adjusted with inflation) should not give people peace of mind about their possible long-term-care needs.

The LTC NEWS Cost of Care Calculator shows that the current care cost in Washington is rising rapidly. For example, in Seatle, a month of care at home, based on a 44-hour week, is now averaging $6,883 a month. In 2050 that cost is expected to run $14,132 a month. Assisted living facilities, memory care, and nursing homes are also very costly.

Washington Long-Term Care Cost of Care.

No thank you" is one of the nicer things Washingtonians say about Washington Cares and lower paychecks.

Other States Looking to Add the LTC Tax

Several other states are looking to follow the lead of Washington. California, New York, Illinois, Michigan, and Minnesota are just a few. Unlike Washington, those states may not give much or any time for their residents to purchase private Long-Term Care Insurance to avoid the tax.

Multiple States Considering Implementing Long-Term Care Tax.

Whether there is an upcoming tax or not, preparing for the rising cost of long-term health care should be part of a retirement plan. Most people get coverage in their 50s, unlike in Washington, where many younger residents bought policies to avoid the tax. 

With LTC Insurance, you can have guaranteed tax-free resources to pay for your choice of quality care services. Your policy will protect your 401(k) and other assets and relieve some of the stress and anxiety otherwise placed on your family. But you would remain in control and be dependent on the state without paying a tax.