While small businesses are fighting to stay afloat and working wage families are struggling to make ends meet, the Washington State Department of Labor & Industries (L&I) today announced a whopping $117 million increase in the workers' compensation taxes paid by employers and employees.

The $117 million tax hike is in addition to the 40 percent workers' comp tax increases employers and employees have already shouldered over the last five years.

"L&I's proposal to increase taxes on small businesses and workers comes during an economic recession that has resulted in Washington State losing more than 117,800 jobs and boasting double digit unemployment rates," said BIAW Deputy Legislative Affairs Director Amy Brackenbury.  "Already struggling businesses will be even more threatened by L&I's proposal," Brackenbury said.  "Any tax increase on businesses right now is crazy-how much more can Washington State businesses take?"

Senator Janéa Holmquist (R-Moses Lake), the ranking Republican member on the Senate Labor, Commerce & Consumer Protection committee, agrees a workers' comp tax increase is the last thing small businesses need right now. "At a time when our economy is trying to recover, the most irresponsible thing we could do is levy a job-killing, multimillion-dollar tax increase on our employers and their employees without first reforming the serious flaws in the workers' compensation system," said Holmquist.

While L&I pushes for businesses and workers to pay higher workers' comp taxes during a crippling recession, the system continues to flounder.  In Washington, the average injured worker misses 257 days of work, nearly three times the national average.  By contrast, Oregon's average time loss rate is about 70 days.  And although employers are doing their part to improve job-site safety and control claims costs (since 1990, injured worker claims have dropped 55 percent), L&I's cost to administer these dwindling claims has increased 28 percent in the last year.  In fact, Washington's workers' comp system is among the costliest in the nation.

"Clearly our state's workers' comp system is broken and needs fixing," said Patrick Connor, state director for NFIB/Washington.  "Businesses and workers cannot continue to shoulder tax increases when the state's economy is in such perilous condition," said Connor.  "The time has come to fix the obviously broken workers' compensation system instead of making businesses and workers pay more and more to keep it afloat." 

Many states around the country are experiencing rate decreases as a result of major reform efforts and competitive markets for insurance.  Workers' comp rates in Oregon decreased by 5.5 percent, marking the 19^th year in a row without a rate increase.  In West Virginia, which moved to a privatized system in 2005, costs are down 30 percent.  Hawaii has decreased premiums 65.5 percent since 2006.  Texas is returning $75 million in premium dividends to employers, just four years after implementing major reform.  Colorado, Tennessee, South Carolina, North Carolina, and Florida are also among the states where workers' compensation costs will be lower in 2010.

"I am frustrated L&I is proposing to increase workers' compensation taxes," said Senator Tim Sheldon (D-Potlatch).  "Businesses in my district are really struggling in this economy and now is a terrible time to raise taxes," said Sheldon. "I hope to see legislation in 2010 to bring efficiency and accountability to the Department."

Brackenbury said the business community would welcome such legislative fixes.  "Washington's workers' compensation system is collapsing, and merely pouring more money into it won't help," said Brackenbury.  "What will help is reforming the system-implementing better ways to operate, increased efficiency and cost cutting measures," she said.  "The business community has been begging for these kinds of reforms for years."

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