Comment: Workers can opt out of long-term care payroll tax
Published 1:30 am Sunday, May 23, 2021
By Elizabeth Hovde / For The Herald
A recent guest commentary in The Herald wrongly accuses insurers of running a “fear-based marketing campaign” to explain to workers their legal rights under a coming long-term-care payroll tax.
One doesn’t have to be “afraid” to see that this 58-cent tax on every $100 earned is not a good deal for many Washington workers. Passed quietly in the Legislature and kicking in this January, a lot of workers will want to opt out of the tax while they still can. And lawmakers just passed a bill limiting the time-window to do so.
The new date for opting out requires action by Nov. 1 and is an attractive, and entirely legal, choice. After all, lawmakers already tax take-home pay heavily. (Most working people pay more in payroll taxes than income taxes).
The promised benefit from the state-mandated program is lousy. A person has to need help with three or more daily activities before receiving the benefit, and the maximum anyone can receive for life is a paltry $36,500. As anyone caring for elderly parents or grandparents knows, that amount is not going to go very far. Even a modest level of care can cost twice that, so people will need private coverage or to spend down their assets to pay for such care, anyway. (See Genworth’s Cost of Care Survey for more on real-world costs.)
Taking money from workers to fund an unpopular, one-size-fits-all entitlement empowers no one but politicians. Not only is the promised entitlement one that many workers don’t want or need, some people won’t even get it; even after paying into the program for years.
If you move out of state you get zero, no matter how much you paid in. Some soon-to-be retirees also are out of luck. Many will have to pay into the program during their highest-earning working years, but they won’t receive the state benefit because they won’t have met the required number of years to be considered vested.
That is why a lot of workers will want to opt out of the program while they still can. To do so, workers will need to attest to having purchased private long-term-care insurance by Nov. 1 when applying to the state for an exemption between October 2021 and December 2022.
Naturally, state officials are not being very loud about this, as they need as many workers as possible paying into the program. They no doubt hope most people won’t hear about opting out and will be stuck paying another tax on their take-home pay.
The public should be thanking long-term-care insurers for getting word out about the coming payroll tax and people’s legal choices for avoiding it. Buying private long-term-care insurance means you don’t have to pay into the socialist state-run program, and owning your own policy brings portability, the choice for a more sufficient lifetime benefit and coverage better tailored to your specific situation.
None of this good information is “fear-based.” It is simply about making smart decisions for your individual needs before politicians make decisions for you. Socialism has consistently failed in countries around the world, and socialized medicine is particularly unpopular in this country. There is no reason people should be forced into a state-run long-term-care program they don’t want and didn’t ask for.
Informing workers about their rights and options under a new law is not scaring them. It’s showing them respect.
Elizabeth Hovde is a research analyst for the Washington Policy Center, a free-market think-tank in Washington state.
