Unemployment taxes go up

For the first time since Steve Fabre entered the restaurant business in 1981, his profits have shrunk this year.

Though his volume has held steady through aggressive promotion and price cutting, the amount he takes home after all the bills are paid at his two restaurants, one in Ruston and the other in Midland, will drop by $33,000 in 2009.

That’s why Fabre saw red when he recently received his state unemployment insurance and workers compensation statements for next year.

Some 170,000 Washington business owners will pay more for both unemployment and workers compensation charges. While rates vary based on a business’s individual layoff rates, the average unemployment rate will jump from 1.55 percent in 2009 to 2.38 percent in 2010, said the state’s Employment Security Department. Workers’ compensation rates are expected to increase about 7.6 percent.

Those increases are particularly significant, said Association of Washington Business president Don Brunell, because most businesses have already shaved their costs to the bone during the recession. Without a significant economic resuscitation, those extra costs, he said, will come straight out of the businesses’ bottom line.

“All of those added, extra costs can be damaging,” said Brunell, because many businesses are walking a thin line between success and failure.

The state says the increase is necessary because the unemployment trust fund has been ravaged by joblessness and lower investment returns during the recession.

Tim Tweten, president of the six-restaurant South Sound Restaurant Group that includes the Harvester in Tacoma and the Poodle Dog in Fife, said the public has become highly value-minded. Customers are sensitive to price increase, so coping with the increased taxes isn’t just a matter of raising prices.

“The state has its need to raise more money, and it’s easiest just to raise taxes and push the problem out the door,” he said. “Maybe they should think about becoming more efficient.”

The Employment Security Department says it has earned national recognition for its careful stewardship of its unemployment funds. The U.S. Department of Labor awarded Washington its “High Quality Tax Operations” award for 2009.

But a huge demand on the state’s unemployment trust fund – as unemployment increased – necessitated raising more money, the state said.

Next year’s unemployment taxes are increasing but only from the 40-year-low rates levied in 2009. The unemployment tax rate this year will be less than it was in 2004 and 2005 during the last economic recovery and equal to the rate the state charged in 2006.

The numbers tell the story of what’s propelling tax rates upward. The statewide unemployment rate rose from 6.1 percent in November last year to 9.2 percent this year. Nearly 232,000 state residents are receiving unemployment benefits.

Careful management of the state’s unemployment coffers through stock market slides and unemployment increases have kept the state’s fund solidly secure, unlike the fund in two dozen other states where their unemployment funds are bankrupt.

Those states are seeking federal aid, which will have to be repaid in the next few years, state Employment Security Commissioner Karen Lee said.

Anthony Anton, president of the Washington Restaurant Association, said the state’s unemployment taxes remain among the highest in the country, second in the nation at $563 per employee according to Department of Labor numbers, he said.

The state’s comparatively generous benefits are a plus not only to those who are among the unemployed but to business as well, said the Washington State Labor Council, a group often at odds with business groups over unemployment and workers compensation rates.

“In the last 18 months,” said the labor council, “the unemployment insurance system has pumped some $5 billion into our state economy.”

Fabre, owner of Cassidy’s Pub and Point Defiance Cafe & Casino, believes that both the workers’ compensation and unemployment insurance systems are biased in favor of the employee.

He says he’s seen employees allowed to draw benefits even when their unemployment was a result of clear violations of company policies.

He expects he might have to trim workers hours at his restaurants to cope with the higher taxes.

“If taxes weren’t so high, “ he said, “we’d be able to put more people back on the job.”

John Gillie: 253-597-8663