Wash. gov. signs $300M in business tax breaks

Gov. Chris Gregoire signed into law Friday a $300 million tax break for businesses and temporary pay increase for people newly claiming unemployment, marking an end to a week of frenzied negotiations among legislators, business and labor interests.

The new laws, which are being enacted from a pair of bills, halts a scheduled 36 percent jump that businesses were about to see in their unemployment taxes. It also makes the tax break permanent. Gregoire says that about 80,000 businesses will benefit from the tax break.

The new law includes a $25 a week pay increase to about 140,000 people claiming unemployment between March and November of this year, Gregoire said. The pay bump is temporary, though. That money is being drawn from nearly $100 million the state is getting from the federal government due to changes in unemployment law. Pay increase to the unemployed will be capped at $68 million. Once that money runs out, the benefit increase will no longer exist.

"It's a good bill for Washington businesses," Gregoire said during signing the bills. "It's a good bill for Washington workers."

Gregoire had demanded that the Legislature deliver a bill this week. She had demanded that the Legislature deliver a bill cutting 2011's unemployment insurance rates by this week in order to avoid the tax cuts. Lawmakers did so Friday afternoon when the Senate approved on a 41-4 vote a House bill that combined both the tax breaks and the temporary unemployment pay increase.

During floor voting remarks, Sen. Janea Holmquist Newbry, R-Moses Lake, said many members of her party were uncomfortable with approving more unemployment benefits while businesses are attempting to rebound from the moribund economy. Republicans argue that taxes on businesses are too high in this state.

Gregoire, though, lauded the efforts between lawmakers and interest groups, specifically pointing out agreements between the Senate and the House.

"This is the art of compromise. No one got everything they wanted," Gregoire said.

At about $2 billion, the state's unemployment fund is in significantly better shape than many others across the country. According to the Employment Security Department, 35 states have bankrupt unemployment insurance funds. Gregoire says that the changes to unemployment benefits law will not risk the health of the fund.

Negotiations on the bills started when Gregoire originally suggested a pair of bills on unemployment policy: the immediate tax cut and extended benefits, and a later bill that would revamp training programs and extend the tax cuts into future years. That training overhaul would make the state eligible for about $100 million in federal aid.

The state Labor Council, however, pushed for a new payment for jobless families with children. That proposal also would attract the nearly $100 million federal payment that Gregoire wanted to claim by boosting training. They argued this money would create spending money that goes back to the state economy.

Business groups have opposed the family benefit, saying it would add a permanent cost that could eventually lead to higher tax bills.

Last Friday, the Senate heeded Gregoire's demand and approved the bill that only gave the tax breaks. But the same day, House Speaker Frank Chopp unveiled the House's version of the bill. It added a temporary across-the-board unemployment benefit that would have used up all $100 million in federal aid.

On Monday, just a couple of hours before the vote and with Republican and business pressure, the bill in the House was changed. Now, the unemployment increase is being tapped out of $68 million. The rest of the money will go to worker retraining and other uses.

"It's a win-win," said Senate Minority Leader Mike Hewitt, R-Walla Walla. "It's the way we should work down here, or at least try to."