The Legislature made significant improvements toWashington's unemployment insurance system in 2003, but UI costs forWashington's family wage employers remain well above the nationalaverage, jeopardizing overall business competitiveness. There is a directrelationship between reasonable unemployment insurance system costs and astrong state economy. High unemployment costs contribute to higherunemployment rates because rising system costs consume scarce resources forjobs and equipment as well as create uncertainties that discourage the hiringof new employees. It is critical that the Legislature continue to work towarddecreasing high unemployment insurance costs while maintaining the stability ofWashington's unemployment system

In early 2005, our state Supreme Court tossed out the stateestate tax in Hemphill et all v. Department of Revenue and Congress is in theprocess of phasing out the federal version as well by 2010. Despite that, thegovernor and legislators have created a new stand-alone death tax in the 2005legislative session.


No matter how you look at it, to tax death is wrong. A deathin the family is traumatic enough and causes disruptions down on the farm, atthe factory, or in the family store because often the founder and leader isgone. Whole communities can be devastated when small business sell to largerbusiness or when small business close shop to avoid the death tax. Familymembers often have to come to grips with who will carry on the operation, butit is very difficult with the tax collector standing in the shadows with acrippling tax bill. By the time the owner of a family businessdies, he or she has already paid federal, state and local taxes on their incomeseveral times – B&O taxes, excise taxes, license fees, socialsecurity taxes, federal income taxes, sales taxes, and state and local propertytaxes, etc. Most of what’s left goes to pay wages and benefits toemployees, who, in turn, pay some of the taxes all over again. When smallbusinesses prepare for the death tax often the result is under-investing in thecompany, hurting future economic growth and the ability to create jobs and theresulting taxes that are paid.

Washington state businesses have become increasingly concernedand frustrated with the existing avenues available for appeals of tax decisionsmade by the Department of Revenue (Department). Taxpayers that desire tocontest the Department's determination of a refund claim or tax liabilityface obstacles that undermine the public's perception of the fairness oftax decisions.

First, a taxpayer must present its challenge to anadministrative law judge employed by the same taxing authority that issued theassessment or denied the refund in the first instance. Regardless of theadministrative law judge's fairness, the judge's status as anemployee and agent of the tax collector creates an unavoidable perception ofbias.

Second, as a precondition to challenging the state'sdetermination of a tax liability before an independent decision-maker, ataxpayer must pay 100% of an asserted liability for tax, interest and penaltyor post a bond, which can be an expensive and onerous requirement. Theimposition of these substantial costs upon the taxpayer's right tocontest state determinations before an independent decision-maker places asignificant burden on taxpayers and can discourage legitimate challenges tostate tax determinations. Furthermore, it has a chilling effect upon ataxpayer's right to judicial review, especially upon small and mid-sizedbusinesses that often find it impossible to produce the substantial fundsnecessary to pay the tax to get to court.