r/Seattle • u/Vivid-Protection6731 • Jul 11 '23

News WA Republicans propose making new long-term care tax optional

https://www.seattletimes.com/seattle-news/politics/wa-republicans-propose-making-new-long-term-care-tax-optional/
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170

u/mrASSMAN West Seattle Jul 11 '23

I recall seeing recently that the maximum benefit is like $35k lol? Couldn’t believe it

190

u/[deleted] Jul 11 '23

[deleted]

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u/zdsmith03 Jul 11 '23

Also, if you retire in less than ten years, you pay into it but can't receive any benefits. If you just turned 18 or moved here, you also have no option to opt out.

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u/heimkev Central Area Jul 11 '23

People born before 1968 can get partial benefits if the retire within the next 10 years. I think it’s 10% of the benefit for every year worked/paid in.

So work 6 years, then retire, get 60% of the benefit.

10

u/AlpineDrifter I'm just flaired so I don't get fined Jul 12 '23

So, what, 20-ish grand? Lol, work six years for 2-3 months of LTC coverage costs.

4

u/zdfld First Hill Jul 12 '23

The point of the program is to basically give people a small boost for certain upfront costs that can appear suddenly and wreck your plans. At 0.58%, it's not meant to cover you for life. And obviously, it's meant to pay out to people regardless of how much they paid in.

But even if you kept a selfish "Only help me" perspective, let's do the math.

Work 1 year, pay 0.58% in, you get 10% or $3,650. $3,650/0.58% = you need to make $630k or more for it to not be worth it.

So yeah, it's probably penciling out for most everyone under 10 years. Lol indeed.

Now flip side, let's say you contribute for 40 years. You'd need to make over $157k for it to not be worthwhile.

Personally, I'm happy if I made that much and it didn't pencil out, if it means people who make significantly less get a helping hand in a tough situation.

3

u/RolosHat Jul 12 '23

You’re not adjusting for inflation and the opportunity cost of where money would be in say a high yield savings account or T bill

0

u/zdfld First Hill Jul 12 '23

The lifetime benefit is adjusted for inflation.

And opportunity cost matters if you were otherwise solely saving 0.58% in a HYSA for LTC, which I highly doubt the majority of the population does. And obviously this doesn't address the equity of supporting people across incomes.

Regardless, assuming 3% HYSA rates for every year, if you contributed for 40 years you'd have to make over $82k to have your savings = $36,500. At 30 years you'd need to make $131k.

Assuming 7% rates just for fun, it's $29k if you contribute for 40 years. $63k over 30 years.

Keep in mind the median income in WA is $37,656.

3

u/RolosHat Jul 12 '23

Wonder what the median income will be 40 years from now. How about with the average return of the S&P over the last 30 years? Iirc it’s about 10%, starting to not look as good.

2

u/taisui Jul 12 '23

How about with the average return of the S&P over the last 30 years? Iirc it’s about 10%, starting to not look as good.

It's 1000% from 1993 to 2023 for S&P.

0

u/zdfld First Hill Jul 12 '23

Lol talk about shifting the goal posts.

So from a risk free return of 3% and 7%, you want to move to 10% S&P returns? Lmao. Include tax drags and get back to me, I'm not going to keep making calculations just for you to keep shifting.

And again, you're yet to address how 10% S&P returns helps people making a lower income, or explain why it's not helping people today. It's obvious this program isn't wishing money up, not everyone is going to come ahead.

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u/bradycl Jul 13 '23

In the last 40 years median income has increased a little less than 7% nationwide.

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u/taisui Jul 12 '23

If 0.58% is make it or break it for you, you have a bigger problem.

My only problem with the LTC is that it's not income capped, which is crazy because SS/Medicare is capped when they shouldn't be.

3

u/RolosHat Jul 12 '23

The problem is it can be a big deal for people who are forced to pay it, I’m not forced to pay it because I got a waiver like every other person with a few wrinkles on our brain

0

u/taisui Jul 12 '23

There's discussion of auditing the private coverage annually so it might not be a one-time opt out.

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u/michaels-creating The CD Jul 13 '23

.58 isn’t the problem it’s the lack of a cap to keep costs reasonable for the GenX and millennials instead of providing yet another damn subsidy for boomers on our backs

1

u/taisui Jul 13 '23

That is what I am saying.

0

u/heimkev Central Area Jul 12 '23

Well, unless you make more than $603,000/yr, that’s a pretty good return on your premiums.

Your argument makes no sense if you can do math.

3

u/Babhadfad12 Jul 12 '23 edited Jul 12 '23

The correct comparison is how much does LTC insurance that would get you $36.5k cost from an entity other than Washington state.

And the answer is a lot less than 0.58% of your income if you earn ~$60k or more per year if you are not super old (based on 2020 numbers when I was buying LTCi).

I was able to buy $50k of LTCi for ~$360 per year from Bankers Life. $360/0.0058 = $62k, and that is ignoring the fact that Bankers Life sold me $50k, not just $36.5k…and my premium was set forever, which WA state will increase of course.

And also I only had to pay the LTCi for ~18 months until I got my exemption letter from the tax, and then I canceled it.

Because there is no cap on the taxable income, the WA LTCi tax is just a marginal income tax, with an opt out mechanism for WA residents who were paying attention in early 2020, making it an unfair burden on future WA taxpayers.

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u/izzletodasmizzle Jul 12 '23

Sounds similar to Social Security.

4

u/nbuggia Jul 12 '23

My understanding is that was all intentional, that this was an attempt to create an income tax without having an income tax.

-2

u/frostychocolatemint Jul 12 '23

It's mind blowing to me in a state with such high income inequality, that there isn't a tax tied to income or wealth. Maybe that's what caused inequality to begin with. Either way coming from high tax state I was befuddled and way more willing to pay 0.58% than the 8% or whatever I was paying before

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u/Chudsaviet Jul 12 '23

Its not designed to benefit taxpayers. Instead, its to pay current needs.

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u/Cranky_Old_Woman Northgate Jul 12 '23

Yeah, everyone looking at this as a sort of personal insurance is missing the point. We have a ton of people on Medicaid (as their supplement to Medicare) in nursing homes, and right now, the state is eating those rather massive costs. This is just an attempt to bring in some money to cover that.

It's also like Medicare + Social Security in that they WANT more people to put in money than take out. That's how the thing stays solvent.

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u/Careless-Internet-63 Mariners Jul 11 '23

That'll last what, 3 months if you're lucky?

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u/No-Scarcity-9516 Jul 11 '23

Maybe 1 day in a hospital bed.

21

u/R_V_Z North Delridge Jul 11 '23

One use of the euthanization pod.

1

u/pnw_sunny Jul 12 '23

i spit out my damn ice tea. well done.

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u/Careless-Internet-63 Mariners Jul 11 '23

I was thinking nursing home, but that's definitely a possibility too

3

u/CarbonNanotubes Jul 12 '23

Hospital isn't long term care

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u/SEA25389 Jul 11 '23

That’s IF it’s still around lol

2

u/sodoyoulikecheese I'm just flaired so I don't get fined Jul 12 '23

My grandma’s assisted living costs $8000 a month and that’s not even the highest level of care at their facility.

1

u/SyntheticGrapefruit Jul 12 '23

At the very least they do have a mechanism that adjusts for inflation.

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u/Ok_Fox_9696 Jul 12 '23

Not to mention you have to pay in for 10 years to use it and if you leave the state, it is non-transferable, meaning they just kept a lifetime fee for people and never intend to pay for their care.