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Democrats confident of prevailing on taxes


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POSTED: Thursday, April 23, 2009

Ignoring veto threats from Republican Gov. Linda Lingle, Democrats in the state Legislature sent her bills calling for more than $300 million in tax increases.

               

     

 

TAX BILLS PASSED YESTERDAY

        » HB 1741: Increases the tax for real estate sales above $2 million.
       

» HB 1747: Increases high-income tax brackets.

       

» HB 1175: Increases the per-cigarette tax to 13 cents starting in July and 15 cents by July 2011.

       

» HB 895: Increases the tax on tobacco products other than cigarettes and cigars.

       

» SB 1111: Increases the tax on rental proceeds from transient accommodations (hotel room tax), with all the extra money going to the state.

       

 

       

For more than a week, Lingle has said she would reject bills to increase the hotel room tax and state income tax, but yesterday Democrats in the House and Senate voted to raise taxes anyway.

The bills were met with GOP opposition in the House and Senate, but by early afternoon the Legislature was speeding to Lingle bills to raise the income tax, the cigarette tax, and real estate sales and hotel room taxes.

Democrats like Senate Vice President Russell Kokubun (D, Hilo-Naalehu) called taxes “;a necessary evil”; and defended the proposed increases.

House Speaker Calvin Say predicted the Legislature has the needed two-thirds' majority required to override any vetoes.

Lingle previously said she would veto the income-tax and tourist-tax bills, but yesterday her senior policy adviser had no such guarantee.

“;That is the way she is leaning,”; said aide Linda Smith. She said the governor found the tax bills “;very disturbing, very destructive to the economy.”;

Lawmakers say the tax increases are needed as the state deals with a two-year budget with a nearly $2 billion shortfall and projections that tax collections will fall again next month.

According to Say, the budget is already trimmed so far back there is nowhere else to cut and the state must look for new money.

The cuts in the budget are drastic, Say said: “;It is close to $400 million in each of the two years.”;

The hotel room tax would increase to 8.25 percent this year—from 7.25 percent—then to 9.25 percent next year. The bill would drop dead in 2015, but legislative critics yesterday said they doubted the tax would ever go down.

The income-tax increase would be for single filers making more than $150,000 and joint filers making more than $300,000. But the measure would also increase the standard deduction and the personal exemption amount in an effort to help low-income taxpayers.

Lingle says that instead of raising taxes, she can balance the budget with $278 million in labor-cost savings by either reducing state worker salaries or furloughing workers and reducing medical benefits.

A labor official in discussions with Lingle who asked not to be identified said the administration is proposing that employees accept 32 to 39 days off without pay during the next two years to protect medical benefits.

But the official said the union fears that the Lingle administration will later lay off workers or cut benefits anyway.