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Governor Gregoire and Legislative Leaders Announce Tax Cuts for Workers and Employers

For Immediate Release: December 4, 2006

Unemployment insurance and workers� compensation rate reductions for employers and workers build on a record of job growth and tax cuts

OLYMPIA � Governor Chris Gregoire and leaders of the Washington State Senate and State House of Representatives today announced that Washington employers will save an estimated $89 million in business taxes next year because of lower premiums for unemployment and workers� compensation insurance. Governor Gregoire has also proposed a six-month suspension of a portion of workers� compensation premiums that next year would save employers and workers another $315 million, bringing the total savings to more than $404 million.

Governor Gregoire has made job growth a top priority. Since taking office, more than 150,000 new jobs have been created. Over half of the additional jobs are in construction and in professional services, such as employment and legal services, accounting, architecture and computer design. Washington was recently ranked by Forbes Magazine as the 12th best state for business and The Small Business & Entrepreneurship Council ranked the state as fifth best for small business and entrepreneurship.

�In a global economy, we have to fight every day to create family-wage jobs by recruiting business and helping existing businesses expand,� said Governor Gregoire. �By working closely with employers and finding ways to cut taxes, we are making sure we remain open for business.�

The Department of Employment Security (ESD) will reduce unemployment-insurance taxes in 2007 an average of 13 percent, for a savings of $58.4 million. The Department of Labor and Industries (L&I) will reduce workers� compensation premiums next year by an average of 2 percent, for a savings of $31 million.

Of the total savings of $404 million, at least $48 million will go specifically to small businesses. For example, approximately 67,000 small businesses in the lowest tax bracket will be paying less than half of what they would have paid in unemployment-insurance taxes in 2005.

The proposed workers� compensation rate suspension would occur in the second half of 2007, when the rate paid by workers and employers into the Medical Aid Fund would be reduced to zero for a period of six months. Public hearings on the proposal will be held later this month.

�The savings we�re talking about today are proof that the Democratic leadership is not only looking out for workers, but that we�re also helping ensure businesses all across Washington prosper,� said Senate Majority Leader Lisa Brown, D-Spokane.

�Creating a healthy economy for One Washington means we constantly look for ways to reduce costs for businesses, large and small,� said House Majority Leader Lynn Kessler. �We are proud of Governor Gregoire for taking this step.�

The Legislature and Governor Gregoire approved the unemployment-insurance tax cut earlier this year. According to ESD, rate reductions will range from an average of 2 percent for businesses in the highest rate class to a 25.5 percent reduction for businesses in the lowest rate class. Notices about the rate changes will be sent to more than 194,000 Washington employers by mid-December.

L&I�s rate reduction and its proposed partial rate suspension are possible because of higher-than-expected investment earnings and the agency�s success at controlling health-care costs. In addition, employers and workers have contributed to a declining frequency of workplace injuries and illnesses.

If the proposed workers� compensation rate suspension is adopted, a wood-frame building contractor who employs 25 full-time workers and has an average claims experience would save about $22,000 over the six-month suspension. A vegetable farmer with a similar number of employees and claims experience would see savings of about $5,300.

In the case where employers deduct the workers� comp premium from their employees� paycheck, the average savings next year in agriculture would be $267 per worker. In food processing and manufacturing, the savings would average $378. Health-care workers and employers would save, on average, $153 per worker next year. The worker and employer would equally divide this savings.

�Governor Gregoire and employers have told us they want predictable, stable workers� compensation rates,� said Judy Schurke, acting director of the Washington Department of Labor and Industries. �We are achieving that goal with our proposed rate suspension and the 2 percent rate decrease.�

Due to tax cuts passed by the Legislature and signed by Governor Gregoire since 2005, with continued savings through 2009, the cost of doing business in Washington has been reduced by nearly $241 million. The measures signed by Governor Gregoire include B&O tax exemptions for dairy, seafood and fruit and vegetable processors; a B&O tax reduction for the timber and wood products industry; expansion of aerospace tax incentives; and sales tax exemptions that reduce costs for farmers.

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