RICHLAND, Wash.-When Leo Bowman, a Richland tire dealer, saw his unemployment insurance tax skyrocket some 600 percent, he decided it was time for him to change-the law. So he lobbied state legislators for a year, trying to get them to modify the state's unemployment tax law, which he believed was unfair to small businesses.
He testified in front of labor committees in both the state Senate and House of Representatives, even phoning and writing the members of those committees to plead his case.
All his hard work paid off on May 11, when Gov. Mike Lowry signed House Bill 1350 into law, allowing employers to make ``voluntary contributions'' to avoid large tax increases, according to the Independent Business Association (IBA) in Bellevue, Wash. The law takes effect for the 1996 tax year.
Mr. Bowman, owner of Leo's Line-Up & Tires, began his crusade in April 1994 when he said he could not believe that his unemployment insurance tax jumped from $3,000 every four years to $17,700 just because he laid off one of his five employees back in 1993.
``I said, `Whoa! What is this?'*'' he said, noting that during the 20 years he owned the business he had never had a problem like that.
But because 20 percent of his staff had been laid off, his tax rate shot up accordingly. And even though his ex-employee collected only $4,550 in unemployment benefits, he was expected to pay more than $13,000 beyond that.
The problem with Washington's unemployment insurance tax is that it is experience-related, so an employer's tax rates increase whenever he fires or lays off employees, said Gary Smith, executive director of the IBA.
Because a small employer's total payroll is small in relation to the cost of an unemployment claim, his rates can jump dramatically in one year from only one claim, Mr. Smith said.
``The first thing I did was call the (Washington) Department of Employment Security (DES) and ask them, `What's going on?'*'' he said.
He thought it was a mistake, he said. He attended a special hearing to review records, hoping to find a mistake in the calculations.
But there was none.
``In effect, (the judge) said, `Tough luck,'*'' said Mr. Bowman. ``So the only thing left for me to do was to change the law.''
He called for a hearing with the DES and telephoned the IBA for help.
Mr. Smith said the IBA had been pushing for a change in the legislation for about two years, but it was Mr. Bowman who ultimately solved the problem.
``It is an issue that, while it hits a few small-business owners each year, nobody is willing to stand up and make the effort that Leo made,'' he said. ``Leo put a human face on a real problem. . . . Otherwise it's just a bunch of numbers.''
Mr. Bowman was no stranger to politics, though, having served on the governor's Small Business Improvement Council from 1986 to 1990.
``Leo is an outstanding spokesperson on behalf of the small businesses,'' said Mr. Smith.
Under the new law, an employer has from the time he is notified in November of a change in his tax rate, due to an unemployment claim(s), to Feb. 15 of the following year to make a ``voluntary contribution'' to the DES, according to the IBA. Payments must be voluntary in order to remain consistent with federal regulations, Mr. Smith said.
An employer can ``buy out'' the experience by paying the amount of the claim(s) plus a 10 percent surcharge. As a result, the employer's tax will remain the same as it was before the ``experience.''
In Mr. Bowman's case, it would have saved him about $13,000.