House overhauls unemployment insurance taxes

Changes benefit Boeing, retailers

REBECCA COOK, THE ASSOCIATED PRESS

Originally published Tuesday, March 12, 2002

OLYMPIA -- The state House granted one of The Boeing Co.'s wishes Monday by passing a bill to overhaul Washington's unemployment taxation system.

Washington workers get some of the most generous unemployment benefits in the nation. Businesses pay taxes into a fund that pays out benefits to laid-off workers.

Some businesses have long complained the system is unfair. For example, retail stores and manufacturers such as Boeing pay more in taxes than their laid-off workers take out in benefits, while the construction industry pays less in taxes than its laid-off workers take out in benefits.

House Bill 2901, passed Monday with a bipartisan vote, aims to correct that unfairness. It also caps growth in unemployment benefits for eight years and extends benefits for laid-off aerospace workers. The bill now goes to the Senate.

"This is about helping business in Washington," said Rep. Steve Conway, D-Tacoma, who sponsored the bill.

Aerospace 'parachute'

Helping business in Washington has weighed heavily on legislators' minds recently. Boeing relocated its headquarters from Seattle to Chicago last year, a big blow to the state. Boeing Commercial Airplanes CEO Alan Mulally visited Olympia earlier this year and told lawmakers that of all the places the airplane manufacturer does business, Washington state is the worst. In a letter to House Speaker Frank Chopp, D-Seattle, Mulally said unemployment taxation and transportation were the company's main concerns.

Rep. Jim Clements, R-Selah, complained that the bill was a "golden parachute for aerospace" that failed to do enough for other industries. He objected to the $33 million in extended benefits for laid-off Boeing workers.

"There are winners and losers," Conway admitted.

According to the state's Employment Security Department, in the next three years the general construction industry will pay about $5 million more in taxes than it would have without the bill, heavy construction will pay nearly $9 million more and special trade contractors will pay about $5 million more.

Those are the losers. Conway said although the construction industry takes a hit in the bill, the state's transportation and construction budgets should give contractors enough new business to ease their pain.

The big winner is Boeing. Manufacturers of transportation equipment -- i.e., airplanes -- will save $16 million in taxes over the next three years, according to the Employment Security Department. General merchandise retailers will save $5 million, and restaurants will save nearly $10 million.

"It is a positive step forward from a competitiveness standpoint," said Boeing spokesperson Cris McHugh. Boeing employs about 70,000 people in Washington. Other business associations supported the bill, too.

Organized labor also supported the bill -- even though it includes a 4 percent cap on the growth of benefits for laid-off workers until 2010.

"That was our part of the bargain," said Washington State Labor Council President Rick Bender. He said he hoped addressing the tax fairness issue would reduce some of the pressure to cut benefits. And, he said, the bill could help keep businesses like Boeing in Washington.

"Hopefully this will be one of a number of factors, including transportation, that help Boeing make the decision to do the Sonic Cruiser here in Washington and create more family wage jobs," Bender said.

Some House Republicans opposed the bill, saying they were disappointed it didn't do more to reform the system, such as limiting or cutting off benefits for people who voluntarily quit jobs. Democrats, who hold a two-vote majority in the House, defeated a number of Republican amendments. However, many Republicans supported the bill in the end.

The Olympian Copyright 2002

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