State Senate panel State Senate leaders are sticking by plans to raise taxes despite strong opposition from businesses, House leaders and Gov. Linda Lingle.
approves tax hikes
An excise tax increase is opposed
by Lingle and House leadersBy Richard Borreca
rborreca@starbulletin.comThe Senate Ways and Means Committee approved both raising the general excise tax to 4.5 percent from 4 percent and giving the counties the chance to create a new sales tax of up to 1 percent. (If both proposals became law, residents could pay 5.5 percent tax when they buy items.)
But within hours of the committee approving both tax proposals, House Speaker Calvin Say said the bills would fail in the House.
And, at a news conference yesterday, Lingle said she remains strongly opposed to any increase in the general excise tax.
Say, who met with Lingle yesterday, said they were both confident the state budget can be balanced without a tax increase.
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Even if the House and Senate approved a general excise tax increase, the bill faces a likely Lingle veto.
Say (D, Palolo) predicted the House did not have the needed two-thirds vote majority needed to override the veto.
"It is going to look awfully difficult ... and personally I am opposed to raising the GET (general excise tax), and I have conveyed that message to the Senate many times," Say stated.
"I am not going to go through that exercise unless there is a two-third vote to override. If I can't override it, why go through it?" Say said.
Lingle had similar advice, saying the tax increase appears doomed.
"I think the Senate talking about a tax increase is not in anyone's best interest," the Republican governor said.
"The House is not going to go along with them. They made that clear: that if I remain opposed to it, they will not go down that road," Lingle said.
Senators, however, see the tax increase, which would also feature an offsetting food tax credit of up to $100 a person for local taxpayers, as a way to get more money for education.
Senate President Robert Bunda said the Ways and Means Committee plan is to use the estimated $120 million a year more in increased tax collections for school repair and new programs.
"I think the speaker should look at the content of what we are trying to do, help education," Bunda said.
"We want to focus on education. If we focus on textbooks, facilities, teacher retention and even lowering class size, hopefully the House can see the value in seeing this through," Bunda (D, Wahiawa) said.
The tax increase picked up support from the Hawaii State Teachers Association and the University of Hawaii, which would get a portion of the money from the tax increase.
But the bill was opposed by the Hawaii Tax Foundation, the Chamber of Commerce, the Hawaii Association of Realtors, the Hawaii Business League, the National Federation of Independent Business, the Retail Merchants of Hawaii and the Ocean Tourism Coalition.
For Honolulu, exercising the sales tax option would cost the city its current $35 million share of hotel room tax revenues, a swap that Mayor Jeremy Harris said he supports. For the neighbor island counties, it would cost them half of their current room tax revenues.
The proposal gives the city until Aug. 1 and the counties until Oct. 1 to exercise the option for the 1 percent sales tax, which would take effect Jan. 1.
As a former two-term mayor of Maui County, Lingle said she had always supported giving the counties additional taxing power.
However, the Senate bill puts too many restrictions on when the counties could implement the sales tax and on setting the exact amount, she said, adding that those elements could change as the measure continues in the legislative process.
The Associated Press contributed to this report.
