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Originally published Friday, December 10, 2010 at 2:48 PM

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Don't raise taxes that will hurt business efforts to recover

The Seattle Times editorial board shines a spotlight on two state business taxes going up in January: the payroll tax for unemployment compensation and the payroll tax for workers' compensation.

NOW is not the time to be inflating two taxes that will hamper business efforts to climb out of the recession.

The state tax on payrolls pays for unemployment insurance, which is a good thing. The tax, however, adds directly to the cost of employing a worker, and increasing it hurts when unemployment is at 9.1 percent. And that tax, we note, is going up next year from an average 2.39 percent of covered wages to 3.26 percent, a 36-percent increase.

Some businesses pay more and some less, depending on how many workers they have laid off in the past four years. Still, the companies that have laid off no one, and pay the lowest rate, will be hit with a 40-percent increase.

The taxes are pegged to the unemployment fund, which is depleting and has to be filled. In the long term, legislators might save money by tightening up eligibility requirements or making some other change, but for the short term there may be no way around paying more. Still, it hurts.

Taxes for workers' compensation are also going up. There are several ways the Department of Labor & Industries could be reformed to bring costs down, starting with the way it defines workplace injury. It has not done those things. There was a measure on the ballot, Initiative 1082, which would have allowed private competition for workers' comp. It failed. In 2011, workers' comp rates will go up an average of 12 percent.

Not all businesses have revenues rising at a 12-percent rate, let alone 40 percent, and so these taxes will require them to shrink something else. And they are not the only taxes. In this state, businesses pay a sales tax when they buy, a gross receipts tax when they sell and a property tax when they own.

There is also the state minimum wage, currently $8.55, the highest state minimum in the United States. It is going up in January by 12 cents.

The stack of state-imposed costs does slow businesses down. They feel the weight of it, and they have a sense that nobody in government knows or cares how heavy it is.

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