May tax revenues downBy Mike Yuen
1.4 percent from 1998
State tax revenues for last month dropped 1.4 percent, or $2.9 million, when compared with May of last year.
And with a month left in the current fiscal year, the year-to-date tax collections are just 0.4 percent, or $9.1 million, more than the amount deposited during the same period last year, state Tax Director Ray Kamikawa announced yesterday.
The Council on Revenues has forecast that the current fiscal year, which ends June 30, will finish with only a tax revenue gain of 0.5 percent.
The tax revenue picture did not surprise Gov. Ben Cayetano.
He said he expected tax revenues to decline because a four-year, $750 million personal income tax reduction that went into effect Jan. 1. Tax revenues are probably going to dip even further because he intends to sign a bill that, over seven years, will significantly reduce the serial imposition of the 4 percent general excise tax on goods and services, costing the state about $150 million when it is fully implemented, he said.
While the tax cuts will cause the state to lose funds, they are intended to get money circulating in the state's stagnant economy and hopefully lead to increased revenues and long-term strengthening of the economy, Cayetano said.
His administration needs to keep a close eye on the flow of tax revenues and if it must, it will impose some restrictions on state government spending, Cayetano said.
Kamikawa said excise and use taxes, the state's largest source of revenue, was relatively unchanged last month. But the cumulative fiscal year deposits from excise and use taxes was 0.7 percent, or $9.7 million, ahead of the previous year's pace.
Collections from the individual income tax dropped "by $6.7 million, mainly because of an $8.1 million decrease in withholding taxes," Kamikawa added. "As a result, cumulative general fund deposits of the individual income tax declined 0.6 percent compared to last year's figure."
Assessing the isle economy, Cayetano said, "I think we are on the road to a modest recovery."
The Japanese economy, which has a significant impact on Hawaii's, "has pretty much bottomed out" and it is on the upswing, as is South Korea's, Cayetano added.
The visitor industry, the isle's economic engine, can also help the state by capturing a larger share of visitors from Japan and elsewhere, he said.
"Japanese tourists, for example, are looking for value now," Cayetano said, noting that Japanese visitors pay three times the rate that is charged isle residents.
And perhaps there needs to be more of a focus "on groups that have potential -- seniors, who are pretty much recession-proof, and honeymooners. Hawaii gets half of the Japanese honeymooners who get married (in the United States)," Cayetano said.