An enormous pending tax increase on Hawaii businesses would be reduced under a measure that passed its final committee yesterday.

The proposal shrinks the average unemployment tax businesses would pay this year, from $1,070 to $630 per employee. But that's still the largest such tax hike in the nation—a 600 percent increase from the $90 per employee that businesses pay now.

“;Small businesses really need help now. We don't need shackles,”; Jason Princenthal, president of Honolulu-based Aircare Environmental Services, told senators on the committee. “;Small businesses can't really tolerate the stress of any undue expenses.”;

The taxes pay for unemployment benefits drawn by out-of-work residents, but the increasing number of laid-off employees has strained the state's savings.

Hawaii is burning through its unemployment funds at a rate of $30 million per month.

The larger tax increase had been called for using a complicated formula designed to ensure that unemployment funds keep flowing to the jobless.

“;If nothing is done soon, many more people will be put out of work,”; said Jim Tollefson, president and chief executive of the Chamber of Commerce of Hawaii.

A joint committee of 14 senators from Senate labor and money committees unanimously approved the bill yesterday, forwarding it to the full Senate for a final vote next week. Then the measure would go to Gov. Linda Lingle.

State officials want the bill to become law by March 12 so that quarterly tax bills can be mailed with the lower tax increase.

The plan is a compromise that's similar to a Chamber of Commerce proposal. It provides for two years of tax relief and borrows money from the federal government to keep unemployment funds solvent.

Lingle's administration preferred a plan providing four years of tax relief, but interest payments would have been higher and unemployment reserves would have recovered more slowly.

Companies have warned that a large tax increase would force additional layoffs and possibly force them to close, said Darwin Ching, director of the state Department of Labor and Industrial Relations.

“;They're talking about businesses shutting down,”; Ching said. “;They're not crying wolf. They're saying how it really is. The plea is real and the help is needed.”;

Hawaii has some of the most generous unemployment benefits in the nation, with a maximum payment of 75 percent of an employee's weekly wage, up to $545 per week.

The legislation calls for benefits to be reduced to 70 percent of an employee's weekly wage, but not until 2013.