Thursday, October 2, 2003


County tax proposal
needs thorough review


Legislators are considering a plan to allow counties to levy a 1 percent sales tax in exchange for money they now receive from the state's hotel room tax.

THE FEDERAL government's increased demands for education and security without providing adequate funds are leaving states and municipalities a lot more than a dollar short. Hawaii and its counties are struggling with budget deficits while attempting to maintain services the public wants without raising or adding taxes.

However, there are times when tax increases have to be considered and with a new four-year police contract that will add about 17 percent to the counties' payroll costs, such a time may have arrived. But before lawmakers decide on giving counties the authority to establish a retail sales tax, a complete accounting of how the money will be spent and the effects on individuals as well as businesses must be delivered. A review of spending priorities also is necessary before taxpayers are further burdened.

Legislation that would have granted the city the power to add a tax to its revenue-generating tier failed at the last session, but Sen. Donna Kim is reviving the idea and will hold hearings on the proposal later this month.

Kim's plan would be to trade the retail tax authority for the counties' shares of the hotel room tax, which amounts to about $60 million a year. The city, for example, would give up its $31 million portion of the hotel tax, but officials estimate that up to $120 million would be collected through a 1 percent retail sales levy. How much Neighbor Island counties would stand to gain hasn't been calculated, but during the legislative session, county officials were reluctant to give up their hotel tax allocations.

At present, property taxes are the primary means through which the counties raise revenue, but as Kauai Mayor Bryan Baptiste testified, increases over the years are jeopardizing owners' ability to hold on to their homes and lands.

Allowing counties to assess a tax on retail sales supplies them a larger measure of autonomy, but whether that should be swapped for hotel revenues should be examined. The reasons for giving counties a share was that tourism places demands on services they provide, such as roads, water, sewers, police and fire, garbage collections and landfills and parks. These demands will remain.

The hotel tax revenue would then flow into state's coffers, and the state government can certainly use the money as Hawaii's economy stutters like the rest of the nation's. As a matter of fact, the idea for the tax-for-hotel-revenue swap was the result of the last legislative struggle to balance the state's budget.

However, a $60 million potential infusion into the state's treasury cannot be cause for governmental indulgence. Nor can counties squander their new revenues on frivolous visions like oversized community signs. Taxpayers are footing the bills and they deserve a thorough analysis of this new tax proposal.



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