State tax revenues
drop 5.3 percent

By Russ Lynch
Star-Bulletin

State tax collections fell 5.3 percent last month as income from both general excise and hotel room taxes dropped compared with August 1996.

The state Department of Taxation today reported that overall collections for the state general fund totaled $213.4 million last month, compared with $225.4 million in the August 1996.

General excise and use taxes amounted to $111.2 million, down 5.8 percent from $117.9 million in the year-earlier month and the room tax collected totaled $9.5 million, down 6.7 percent from $10.3 million.

Paul Brewbaker, Bank of Hawaii's chief economist and a member of the state Council on Revenues, cautioned that there are anomalies in how tax collections are handled in the first couple of months after the end of the fiscal year in June. That would account for some of the dip, he said.

Still, he cautioned, there are signs of business being down. Japanese and other Asian tourists are getting a less favorable dollar-exchange rate and that appears to be cutting into retail spending in Hawaii, Brewbaker said.

And rises in hotel room rates, which in recent years have boosted room tax collections, may have gone so high that resistance has begun to show, he said. "We appear to be at that point. The shorter length of stay is really starting to bite."

Brewbaker said the state Council on Revenues sees no reason yet to change its estimate that tax revenues will rise between 2 and 2.5 percent in the fiscal year that started July 1.

July and August combined showed a drop of 6.9 percent in general fund tax revenues from the same period last year.