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The Associated Press February 10, 2011, 8:52AM ET

House approves $300 million business tax break

The Legislature's attempt to speedily approve $300 million in tax breaks took a decisive step Wednesday, with the House unanimously voting for a tax break bill that also included a temporary pay increase for people claiming new unemployment benefits.

Lawmakers had been working on a tight deadline. Gov. Chris Gregoire has demanded that the Legislature deliver a bill cutting 2011's unemployment insurance rates by this week. If that provision is not signed into law in time, Gregoire says businesses could see their unemployment taxes jump by an average of 36 percent as they try to rebound from the Great Recession.

After a few days of frenzied negotiations, legislators in the House voted to give businesses the permanent tax break and include a pay bump of $25 a week in existing benefits to people who enroll in unemployment between March and November of this year.

The bump is temporary, though. That money is being drawn from $68 million the state is getting from the federal government. Once the $68 million runs out, the benefit increase will no longer exist.

"We need to do something that benefits the businesses that have paid into (the unemployment fund) and the workers who are unemployed," said Rep. Mike Sells, D-Everett. "We're going to do what we can out of this House to move this economy forward."

The House's bill now goes to the Senate, where a vote is expected as soon as Friday. Sen. Jeanne Kohl-Welles, a Democrat who has been a key negotiator in the Senate, said she was optimistic that the bill would be approved in the Senate.

"I'm amazed they were able to pull it together right now," Kohl-Welles said.

The debate 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.

"Well, I don't think this is an agreement that anybody really wanted. Both sides had issues with it. But it's probably an agreement that everybody needed. That's what's important today," said Rep. Cary Condotta, R-East Wenatchee.

Condotta argued that taxes on businesses were already too high.

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 urged the Senate to pass the House bill, saying the new bill "provides a package that helps support jobs and our economy at all levels."

She hopes to sign the bill into law Friday.

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