Lawsuit filed over new Washington state payroll tax

(The Center Square) – A class-action lawsuit was filed this week against a new tax in Washington state intended to fund a long-term care insurance program.

The suit was filed in federal court for the Western District of Washington on behalf of three businesses and six individuals.

Beginning Jan. 1, 2022, employees face a payroll deduction of 58 cents for every $100 earned unless they purchase private long-term care insurance and opt out.

Some 344,000 people have applied for an exemption, including 95,000 in the first week they were eligible. On Oct. 1, when the opt-out window opened, the website crashed. The state so far has approved 140,000 exemptions.

“The state simply does not have the power to mandate an employee benefit,” Richard Berman, an attorney for the plaintiffs, said in a statement.

The suit also says the act violates federal law forbidding states from requiring employees to participate in plans that provide sickness or medical benefits.

The first such publicly funded long-term care insurance program, known as WA Cares, would pay up to $36,500 to each eligible resident beginning in 2025. The money could be used for in-home care, assisted living or nursing home expenses, meal delivery or transportation.

To be eligible, a resident must have worked at least 500 hours per year and paid into the fund at least three of the previous six years. People must also need assistance with at least three activities of daily life, such as eating, bathing, dressing or medicine management.

Others say questions have arisen that the original legislation did not take into account.

Critics point out that older employees nearing retirement will be forced to pay into the program but do not have enough working years left to qualify for the benefit. The same applies to workers who could pay the tax for decades but never qualify if their employer transfers them out of state or decide to retire elsewhere.

The state’s large military population faces the same challenge due to pre-set rotations. People who live in nearby Oregon or Idaho but work in Washington will also be forced to pay but cannot collect.

One of the plaintiffs, Melissa Johnston, lives in Oregon but works in Washington and has no plans to retire in Washington.

“And yet the state is requiring that I buy a long-term care insurance product that can only be used if I retire in Washington – it just doesn’t make any sense,” she said in a statement.

Seattle-based Amazon, Microsoft and Alaska Airlines, and 40 local chambers of commerce sent a letter in September to Gov. Jay Inslee asking him to delay the law.

A conservative group known as Restore Washington is gathering signatures in an attempt to place an initiative on the ballot next year that would allow people to opt out at any time. The current law only allowed people to opt out between Oct. 1 and Nov. 1 of this year.

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