Thursday, May 7, 1998

Excise tax increase
never caught on

THE demise of the proposed increase in the general excise tax is a blow to Governor Cayetano, because it was the key issue among the recommendations of the Economic Revitalization Task Force, which he convened and fully endorsed. Cayetano evidently intended to use the task force program after its approval by the Legislature as the basis for his bid for re-election.

Whether he can still do so effectively is doubtful.

The GET increase would have been more than offset by reductions in the state income tax. Its purpose was to cushion the effects of the income-tax cut on state revenues. Its burden would have been mainly borne by tourists because they would not get income-tax relief.

But this argument either was not understood or was rejected by many. Owners of small business, retirees and advocates for the poor were vociferous in their opposition, and they succeeded in getting the Senate to block the proposal.

From the outset the complicated proposal to increase the GET originally to 5.35 percent, later to 4.5 percent while reducing the "pyramiding" of the tax and cutting income tax rates aroused resistance. The House, perhaps more supportive of the administration than the Senate, went along, but even there the opposition was substantial.

The purpose of the tax package was to improve the economic climate by giving consumers more purchasing power and allowing businesses to keep more of their profits. But such benefits were anything but certain. The small business community didn't buy it. Businessmen who were barely hanging on felt they would have been hurt more by the GET increase than helped by the income tax cut.

Moreover, with the state required to balance its operating budget, any tax cut would have to be offset by a reduction in government spending, which might nullify any stimulatory effect on the stagnant economy. The result could have been considerable pain for questionable gain.

The Legislature may still approve a tax cut but it will be more modest than earlier proposals. Considering the dubious benefits of those recommendations, it may be just as well.


Trustee compensation

BREACHES of ethics by two legislators were necessary for the state House to narrowly reject a bill that would have placed reasonable limits on compensation to Bishop Estate trustees and other trustees of charitable trusts. By a single vote, the House chose to allow Bishop trustees to continue accepting exorbitant annual commissions that now exceed $800,000. Crucial votes were cast by two House members who are financially beholden to the estate.

The Senate earlier approved a bill that would set the pay of trustees of charitable trusts at a "reasonable" level to be determined by a probate judge. The measure was aimed at eliminating politics from the Bishop Estate controversy by addressing overpayments to trustees resulting from court-ordered sales of leasehold land in recent years. Current law only limits trustee pay to 2 percent of income and rents above $205,000, permitting the bonanzas.

The House Judiciary Committee ducked the issue by authorizing a study. However, Rep. Ed Case brought the question to the floor Tuesday through a rarely used procedure.

Judiciary Committee Chairman Terrance Tom and Rep. Robert Herkes acknowledge conflicts of interest regarding Bishop Estate issues. Tom receives a $4,000 monthly retainer as a lawyer for the estate, while Herkes is an employee of a Bishop Estate subsidiary.

However, House Speaker Joe Souki, who was himself involved in the 1996 sale of Maui land to the Bishop Estate, granted Tom and Herkes permission to vote on trustee compensation. They cast the crucial votes against the proposed restriction and the bill was defeated, 26-25.

The issue will be brought up again, and the one-vote margin of defeat indicates that curbs will be eventually approved perhaps as soon as next year or even this session. Lawmakers cannot indefinitely reject the public demand to reduce the compensation of Bishop Estate trustees to reasonable limits.

Bishop Estate Archive

Hubbell on tape

CONGRESSIONAL Republicans are embarrassed over the release of transcripts of taped telephone conversations involving Webster Hubbell while he was in federal prison. Dan Burton of Indiana, chairman of the House Government Reform and Oversight Committee, set off a political storm by releasing the tapes. Democrats have charged that the tapes were edited to put Hubbell in the worst possible light, and that exculpatory material was edited out. President Clinton accused Burton of creating "a false impression."

Under pressure from Speaker Newt Gingrich, Burton has fired a top aide and acknowledged that "some mistakes and omissions were made" in editing the tape transcripts.

In a letter to Republican legislators, Burton said, "A mistake was made in not including in the 30 pages of transcripts a couple of comments made by Mr. Hubbell about himself and the first lady. They were relevant and they should not have been left out."

The blunder has backfired on the Republicans and diverted attention from the real issue: whether Hubbell, one of the president's closest associates, was given financial assistance by the Clintons and their allies after he was convicted of tax evasion and mail fraud to keep him from testifying about the Whitewater affair. Hubbell was indicted on new tax charges last Thursday as independent counsel Kenneth Starr continued to press him to cooperate with Starr's investigation.

The question of hush money for Hubbell should be resolved not buried under the sideshow over the tapes.

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