Senate passes bill to reduce unemployment taxes

Washington businesses could see a reduction in how much they are required to pay in unemployment insurance taxes, under a bill passed Wednesday night by the Senate.

The measure, sponsored by Sen. Jeanne Kohl-Welles, D-Seattle, passed 38-11 and now moves to the House. It is the second part of an unemployment insurance package put before the Legislature this session.

Business groups have argued they are overtaxed when it comes to unemployment benefits, pointing to the nearly $4 billion in the state's unemployment insurance account - one of the most cash-filled trusts in the country.

The Legislature already voted to increase the amount of jobless benefits paid out to the unemployed, which businesses groups roundly criticized.

"Currently the fund is very healthy, but this is largely due to the state overcharging employers over the last year and a half," said Sen. Janea Holmquist, R-Moses Lake. "Twenty-two months' reserve is excessive and employers have been overtaxed."

Lower tax rates will be assessed on a sliding-scale. When the state's unemployment fund is full - as it is now - the amount businesses have to pay in will be kept low. As the fund is depleted, however, the rate of taxation will increase incrementally. The cap on the maximum amount businesses have to pay in unemployment insurance taxes is also lowered.

Though the measure lowers taxes collected from employers, it will not affect the amount of money the unemployed receive.

While most Democrats supported the bill, a few ended up voting against it - including Kohl-Welles.

In dispute was a "voluntary quits" provision that is currently in place when unemployment claims are processed. If a person gives a compelling reason for quitting his job, benefits can be granted.

Under the bill passed by the Senate, someone processing an unemployment claim cannot use his discretion. Instead, benefits can only be granted based on a short list of approved reasons for leaving a job.

Kohl-Welles said the business community was very active in lobbying members of the Senate to eliminate the voluntary quits measure. Out of the thousands of unemployment claims made since April, only a few hundred were granted benefits under the provision, Kohl-Welles said.

"I'm very disappointed with our business community. I think they saw it as a symbolic gesture," she said. "They're already getting these enormous tax breaks."

The issue of unemployment taxation has been contentious in recent legislative sessions.

Tinkering with the insurance program this year was needed in part because the current way of taxing employers is out of sync with federal regulation.

In 2003, lawmakers rushed through an unemployment package intended to get the Boeing Co. to build the 787 in Washington.

Under that package, the state calculated jobless benefits as a percentage of workers' wages over the course of an entire year. That lowered taxes but irked labor groups by decreasing unemployment benefits for some workers. In 2005, the state back to its original system - a so-called "two quarter averaging" - which benefited some seasonal workers by using an employee's two most profitable quarters when determining jobless benefit payouts.

The current bill is a slight pendulum shift away from labor groups and back toward business, which some Democrats don't like.

Sen. Karen Keiser, D-Kent, who voted against the bill, said workers will only get a temporary increase in jobless benefits, while businesses will get tax breaks that last for years.

"It's not equitable ... the balance is just not there," she said.

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The tax break bill is Senate Bill 5963.

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On the Web: http://www.leg.wa.gov