Wednesday, July 8, 1998

Gov OKs tax cut, tourism boost

Cayetano vetoes 8 more bills,
including one for a tax
stamp on cigarettes

By Mike Yuen


Bills to cut personal income taxes and boost the state's No. 1 industry, tourism, will be signed into law by Gov. Ben Cayetano. But a measure intended to curb bootleg sales of cigarettes won't.

That bill, which would require a tax stamp on every pack of cigarettes, was one of eight measures that Cayetano vetoed before a midnight deadline last night.

His last veto message, Cayetano said, was issued reluctantly. It involved a bill that had much merit and was intended to increase government efficiency by eliminating or consolidating certain regulatory boards and functions, he said.

But it also contained a provision to eliminate the use of "material house bonds" used by owner-builders.

That means the bill would bar isle residents from building their own homes and also prevent homeowner self-help projects, Cayetano said.

"The impact on the economy is uncertain. However, estimates on construction costs are in the $100 million range statewide," Cayetano added. "After consultation with the Department of Hawaiian Home Lands, it's unclear whether this provision would hurt homeowners participating in self-help projects."

In the state's anemic economy, self-help projects may be the only way some isle residents can build or improve their homes, Cayetano said.

Cayetano justified his veto of the cigarette tax-stamp measure by saying that federal agencies have not found any evidence of extensive black market sales of cigarettes.

Moreover, another provision of that bill, which covered film-production tax credits, was flawed, Cayetano argued. By limiting the labor cost component of the tax break to expenditures for only workers who are Hawaii residents, the bill seems to be discriminating against out-of-state residents, Cayetano said. That would apparently make the measure unconstitutional, he added.

With his eight vetoes last night, Cayetano has rejected a total of 23 bills that state lawmakers passed during this year's legislative session.

And since the veto deadline has passed, some 100 bills will now become law -- with or without Cayetano's signature.

But, said Cayetano's spokeswoman, he does intend to sign into law measures to cut personal income taxes by $752 million over the next four years, to establish an independent Hawaii Tourism Authority, and to cap the compensation of trustees for the Bishop Estate and other charitable trusts.

Cayetano has until July 21 to sign bills into law, said Kathleen Racuya-Markrich, his press secretary.

It's no surprise that Cayetano wants a signing ceremony for the tax-cut measure; it has his fingerprints on it. Cayetano, with the help of Senate dissidents, forced Senate leaders to accept more substantial tax relief than the 1 percentage point cut over two years that the Senate majority was advocating.

Cayetano's proposal expands all income-tax brackets, lowers the tax rates for each bracket and creates a lower-income tax credit by abolishing the food-tax credit, which he has long believed was unnecessary for middle- and upper-income taxpayers.

Under Cayetano's plan, a family of four with an adjusted gross income of $35,000 will save $1,152 over four years. The savings will be $1,893 for a family of four earning $50,000 annually.

The bill creating the Tourism Authority to be the lead agency in marketing the isles to visitors also establishes a special tourism fund into which $2.75 from every $100 collected in hotel room tax revenues will be deposited.

Cayetano had wanted to cap the salaries of trustees at what the state chief justice earns -- it's now $94,780 annually. But keeping it at a "reasonable" level, as lawmakers proposed, is a good step, he feels.

Bishop Estate trustees were paid about $840,000 last year. He said the controversy that has engulfed the trustees stems in large part to that compensation.

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