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House Democrats provide unemployment insurance tax break to businesses, increase unemployed workers’ benefits

April 10, 2009

OLYMPIA – Thanks to a healthy and robust unemployment insurance trust fund flush with cash, lawmakers in the state House voted to provide employers a tax break worth hundreds of millions, while offering a modest increase and better protections for unemployed workers.

Washington is the first and only state in the nation to reduce unemployment insurance rates for employers, thanks to state policies in place since 2003 that reduced payouts to workers while streamlining rate classes for employers.

The move is noteworthy at a time when many other states are facing bankrupt UI trust funds brought on by skyrocketing unemployment, forcing them into tax increases for employers to sustain their benefit levels.

“Over the past six or so years, this Legislature has worked tirelessly to make the UI system more equitable and less burdensome for business. Consequently, businesses in our state have saved hundreds of millions, while unemployed workers have received less,” said State Rep. Steve Conway (D – Tacoma), the Chair of the House Commerce and Labor committee. “This bill continues to reduce the tax burden on business but in a way that also provides some benefit to the unemployed workers.”

The bill was prompted by a non-conformity issue with federal law, which could have led to higher tax rates for businesses. By using the ample funds in the UI trust fund, this plan mitigates the cost of federal conformity - a $452 million price tag – so employers are not forced to pay that cost.

\In addition, this plan provides a permanent tax break for businesses in the form of lower tax rates, increasing as the economy improves and fewer jobs are lost. Over the next six years, businesses will see their tax rate decrease, saving them an estimated $224 million.

House Democrats also amended the Senate version of the bill, SSB 5963, to include a modest increase to the weekly benefit amount given to unemployed workers in Washington, and authorized greater discretion to the commissioner of the state Employment Security Department to grant benefits in situations when a worker voluntarily quits.

“We’re providing massive tax relief to employers in our state, but also doing the right thing by our working families who have lost their jobs and are struggling to make ends meet,” said Rep. Tami Green (D – Lakewood). “As important as it is to help our state’s businesses, it’s just as important to ensure our workers can pay their rent and put food on the table.”

“ It’s a symbiotic relationship; our workers need jobs, but we also need consumers who can keep spending at our local businesses.”

State Rep. Brendan Williams (D – Olympia), a member of the House Commerce and Labor committee also emphasized the balance struck with the adopted House amendments: “A major win for business has been balanced with hope for unemployed workers.”