Tuesday, September 30, 2003

1% retail sales
tax hearings set

State Sen. Donna Kim
renews a drive to give
counties a tax option

City and state officials are renewing calls to add a 1 percent county sales tax on top of the existing 4 percent state general excise tax.

The Democratic leadership in the state Senate earlier this year failed to move a plan allowing counties to levy the sales tax, but Sen. Donna Kim, a former City Council member, will hold a new round of hearings on the proposal next month.

Kim (D, Kalihi Valley-Halawa) wants to allow counties to raise money with the tax. At the same time, the state would claim the counties' share of hotel room tax money, estimated at $60 million a year.

Hawaii has a 4 percent excise tax, which is essentially levied on most exchanges of money, while a sales tax would be only on retail sales.

Although the bill originated with House Democrats, Kim said leaders in the House earlier this year opposed any tax increase.

She said the bill would need the support of the four counties to move it during next year's session. Kim said House Speaker Calvin Say wants consensus among county leaders before the House would approve the bill.

Mayor Jeremy Harris previously supported the plan, saying the counties need more ways to raise money.

Gov. Linda Lingle skirted the issue earlier this year, saying that while she supported home rule and allowing counties to be responsible for their own tax policy, she didn't think "now was the time to raise taxes."

Yesterday, Kim acknowledged that the plan was a tax increase, but said the bill would give the final decision to the counties.

Lowell Kalapa, Tax Foundation executive director, blasted the idea as a "a scheme to hide the fact that they are looking to raise taxes."

"People will see that they are paying a 4 percent excise tax to the state and another 1 percent to the county," Kalapa said. "They must think consumers are dumb."

Republican Senate leader Fred Hemmings also called the plan "another way to raise taxes."

"I believe in county home rule, but I am going to consistently oppose tax increases," said Hemmings (Lanikai-Waimanalo). "The city's poor management is no excuse for raising taxes."

Honolulu City Councilman Donovan Dela Cruz defended the plan, saying it gives counties the power to raise money without increasing property taxes.

It is premature, he said, to debate whether or not raising taxes is something the county wants to do.

"The argument for the Legislature should be, 'Do we give the counties authority to do this?'" Dela Cruz said.


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