Washington residents will vote on a payroll tax restructure that has the potential to reduce their future rates while also keeping the long-term care fund more sustainable.
Senate Joint Resolution 8212, a state constitutional amendment that would allow payroll tax revenue to be invested in a pension-like system, would replace the current allocation of the 0.58 percent payroll tax passed in HB 1087. According to a press release, the investments from the payroll tax revenue in HB 1087 would be made by the state treasurer. Such investments yield an average return of 2 percent. The previously approved HB 1087 was signed by Gov. Jay Inslee on May 13, 2019, and the tax is slated to become effective in 2022.
The resolution, proposed by Sen. John Braun, R-Centralia, passed the House of Representatives, as well as the Senate, by 98 and 92 percent of votes, respectively. Since the resolution would amend the constitution, SJR 8212 goes straight to the ballot.
“As they (the State Investment Board) invest and get better returns, more money will build up into the fund,” Braun said. “That will allow the Legislature to reduce the rate hopefully or increase the benefit. Those won’t happen automatically, but you’d have the funding to do that.”
According to Braun, the projected return on investment for the payroll tax funds under the new resolution is 6 percent, which exceeds the estimated 5.3 percent return needed to keep the long-term care fund secure.
“This proposal represents a common sense way for taxpayers to protect themselves and possibly end up saving billions,” Braun said in a press release.
Rep. Richard DeBolt, R-Chehalis, and Rep. Ed Orcutt, R-Kalama, both voted in favor of the proposed amendment. For Orcutt, the logic behind SJR 8212 came down to choosing the route with the potential for more lucrative returns.
“Where would you put your money? Would you put it into a savings account that got you 1 percent, or would you invest it in something that’s going to get you a 7.5 percent return?” Orcutt said. “What this is designed to do is to try and make sure we get the best return on the money that’s already being collected.”
The resolution, if passed by the voters, would quantify the long-term care premium passed in HB 1087 to help what DeBolt calls an aging population that isn’t saving “a lot of money.”
“If we didn’t have this program in place, most of these people would be on a state long-term care plan that we, the taxpayers, would be paying for,” DeBolt said. “It wouldn’t be an insurance premium. But if you look at it from the other perspective, any time your state mandates that you pay something, even if you’re getting long-term care, it’s kind of a tax. So it’s a tax with nexus to long-term care, so they had to do some clarification of all that.”
Orcutt compared the investments that would take place under SJR 8212 to investments that are already being made for other purposes.
“It’s what you get out of the long term care fund,” Orcutt said. “It’s the same thing that we do with pensions. You invest the pension dollars to get a higher return, so you end up with more money in the pension fund than what everybody paid in.”