Elizabeth New (Hovde) argues that Washington’s Paid Family and Medical Leave payroll tax increase will further reduce workers’ take-home pay beginning Jan. 1.

Elizabeth New (Hovde) says Washington’s Paid Family and Medical Leave program is a paycheck penalty masquerading as compassion, and it harms low-income workers the most

Elizabeth New (Hovde)
Washington Policy Center

After Washington state’s minimum wage increases take effect on New Year’s Day, many workers might expect their paychecks to feel a little larger. For many, they won’t — not for long, anyway. Higher prices for the goods and services that they use will erode those gains, and some employers will respond to rising labor costs by cutting hours or jobs.

Elizabeth New (Hovde), Washington Policy Center

But there’s another reason many workers — minimum-wage workers and otherwise — won’t have as much as they thought they would in the new year: The state will start taking even more of their wages to fund a program many of them will never use and that increasingly benefits higher-income households.

Starting Jan. 1, 2026, Washington’s Paid Family and Medical Leave (PFML) payroll tax will rise again, this time to 1.13% of gross wages. That increase is automatic under current law and represents yet another pay cut for W-2 workers across the state.

This isn’t a surprise. It’s exactly what some of us warned about years ago. Build it and claims will come.

Washington’s PFML program — sold as an “innovative” and “popular” worker benefit — is projected to run a $350 million deficit by 2029. And workers are now being asked to shoulder yet another payroll-tax increase to keep the program afloat.

PFML’s design has always been flawed. It is funded through payroll deductions — about 72% from employees and 28% from employers — and it pays a partial wage replacement to those who take time off for family or medical reasons. For many workers, especially those living paycheck to paycheck, that trade-off makes taking leave financially unrealistic. Many lower-income workers simply cannot afford the income loss that comes with taking leave. Still, they have to pay the tax.

The tax started at 0.4% of wages in 2019. It has already more than doubled to 0.92% in its short lifetime, and it’s scheduled to rise to 1.13% for 2026. At that level, PFML sits just below the program’s 1.2% statutory cap, and Democratic lawmakers who rule Olympia seem more interested in busting the rate cap than reining in costs.

Legislators have already floated a proposal to raise the cap as high as 2% of wages — a move that would nearly double the rate again. That proposed legislation will be considered again in the coming legislative session.

Everyone pays, not everyone benefits

Using the average Washington state worker wage of $95,160 a year in 2024, such a worker will pay about $768 in payroll deductions for the program in 2026, with her employer contributing another $307. That’s $1,075 that will be taken out of the worker’s compensation — for benefits most workers never use. (Workers can calculate the cost to them in 2026 here: https://paidleave.wa.gov/estimate-your-paid-leave-payments/.)

Supporters often describe PFML as “social insurance.” In practice, it functions as a regressive payroll tax that requires lower-wage workers to subsidize higher-income households. The program’s use makes that clear.

According to information provided to me by the Employment Security Department, in fiscal year 2024, workers earning $61 or more per hour used PFML nearly twice as often as the lowest-wage workers. In fiscal year (FY) 2025, higher-income workers used PFML more than twice as often as those in the lowest wage group. Usage among the bottom wage quintile has fallen steadily — from 12% of all claims in FY 2023 to just 8% in FY 2025. Meanwhile, participation among top earners has continued to rise, increasing from 16% to 18% of total users. (Middle-income earners make up the bulk of claims.)

Other changes in 2026

Despite the program’s shaky finances, lawmakers continue to expand it. Starting in 2026, the minimum amount of time an employee must miss in a week to be eligible for paid leave goes from eight hours down to four, and job-protection rules are expanded to cover smaller employers. Each expansion increases program costs, creates obstacles for employee benefits from their employers and pushes the fund closer to insolvency — guaranteeing future tax hikes or benefit cuts.

PFML is a worker- and employer-paid perk for only some, much like WA Cares will be one day. Layer these programs together and a pattern emerges: Washington state is building an income-tax-by-installment, carved up into payroll deductions that quietly reduce take-home pay. This year, Democratic leaders in the state are also pushing an outright income tax on high earners. If enacted, despite the state’s history, constitution and the Legislature’s passage of Initiative 2111 in 2024, the income tax will very likely end up applying to those who are not among the state’s highest earners.

If lawmakers truly wanted a safety net for workers facing hardship, they would fund it transparently through the general fund. Instead, they have built a worker-financed benefit machine that never stops eating wages.

PFML is a paycheck penalty masquerading as compassion, and it harms low-income workers the most.

Elizabeth New (Hovde) is a policy analyst and the director of the Centers for Health Care and Worker Rights at the Washington Policy Center. She is a Clark County resident.

Under the Grok Lens

Analysis created with Grok

This independent analysis was created with Grok, an AI model from xAI. It is not written or edited by ClarkCountyToday.com and is provided to help readers evaluate the article’s sourcing and context.

Quick summary

In this opinion column, Washington Policy Center analyst Elizabeth New (Hovde) argues that Washington’s Paid Family and Medical Leave payroll tax increase to 1.13% in 2026 is a regressive burden that will fall hardest on lower‑income workers. She notes that program expansions are driving costs higher even though higher‑wage workers use the benefit more often than lower‑wage workers.

What Grok notices

Reviews the program’s premium‑rate history and explains the 2026 increase to 1.13%, including the approximate 72% employee and 28% employer share, so readers can estimate how much will come out of each paycheck.
Describes upcoming 2026 changes such as lower minimum weekly‑hours thresholds for eligibility and notes that these expansions are expected to increase overall costs and claim volumes.
Draws on Employment Security Department data indicating that higher‑income workers have historically used PFML more than lower‑wage workers, supporting the column’s concerns about uneven benefit use.
Frames the payroll premium as a reduction in take‑home pay and argues that the structure of contributions and usage patterns makes the program regressive.
Encourages readers to consider long‑term solvency projections and alternative funding approaches, while clearly reflecting Elizabeth New (Hovde)’s critical perspective on the program’s design and financing.

Questions worth asking

How might the 2026 expansions—including lower eligibility thresholds—change the number and length of claims, and what does that mean for the fund’s long‑term sustainability?
What adjustments to benefit formulas, wage‑replacement rates, or job‑protection rules could make the program more accessible and attractive to lower‑wage workers?
Besides statutory expansions, what other factors (such as economic conditions, demographic shifts, or administrative costs) are contributing to rising PFML premiums?
How do Washington’s PFML tax rates, participation patterns by income, and benefit generosity compare with paid‑leave programs in other states?
Could using some general‑fund support or alternative revenue sources reduce regressive impacts while preserving or improving access to leave benefits?

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