One more time:
Lawmakers aim to
fix economy

The economy is the top
priority tomorrow when
the Legislature opens

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By Mike Yuen
Star-Bulletin

When the 1999 legislative session convenes tomorrow, lawmakers will again be confronting what has been a seemingly never-ending task: finding ways to nurture the state's anemic economy.

It is their No. 1 priority, lawmakers say.

Once more, there will be proposals to cut taxes, including Gov. Ben Cayetano's recommendation that the recently lowered state income tax be cut even more -- from the present 8.75 percent for the highest tax bracket to 7.25 percent in 2002 with corresponding cuts in other brackets.

From the Senate, there will be a strong push to ensure that isle contractors -- and not their mainland competitors -- get a larger share of federal construction projects in the state.

The House will be looking at commercial leasehold reforms and public-private partnerships on public works projects.

It is conceivable, too, that legalized gambling will again be discussed, says Rep. Calvin Say, former House Finance Committee chairman who will be installed as House speaker during opening-day ceremonies. "It is always there," Say adds.

But don't expect any novel idea that will galvanize lawmakers and win widespread community support, say longtime Capitol observers.

Generally speaking, says Lowell Kalapa, president of the Tax Foundation of Hawaii, "The ideas that will be on the table have been there a very, very long time. I think that it has always been more a question of political will. There's been an unwillingness to run contrary to the status quo. People are comfortable with things as they've always been."

For example, the talk in recent years about eliminating the pyramiding of the general excise tax -- where the 4 percent is imposed at every stage of production or transaction, making the excise tax the equivalent of a 12 percent sales tax -- is not new, Kalapa says. In 1967, one study urged the elimination of the tax's pyramiding, Kalapa says.

Sen. Sam Slom, a small-business advocate who decided to become a voice inside government after he continually concluded that business concerns weren't being heard, adds: "In the final analysis, we have the same people in charge as before. They have demonstrated a lack of understanding of capital formulation, of investing and of improving our economic climate."

While the Kalama Valley Republican has often clashed with Gary Rodrigues, head of the United Public Workers union, Slom says he agrees with Rodrigues on one thing: that the public workers unions are not the source of problems that stem from a bloated state government that can no longer be supported by tax revenues.

"It's management. I've said (to Rodrigues): 'You're absolutely right.' Management doesn't hold people accountable. The people elected appoint their friends. It's the same people over and over again. They have no fresh ideas."

Say, also vice president of his family's import-export business, insists it is not a lack of political will that has kept Hawaii locked in an economic malaise during the 1990s. Rather it is a matter of lawmakers themselves and voters "not being educated on the issues," he maintains.

Now, there seems to be a better understanding that Hawaii's economic problems are tied directly to Japan's, says the Palolo Democrat.

Moreover, in the push and pull of the legislative process, it is not unusual for a proposal to take six or seven years to gain approval, adds Say, who acknowledges that there likely won't be any new dramatic initiatives to turn the state's economy around, but at best permutations of previous ideas.

Say has backed down from making a renewed effort to strip hospitals, churches and other nonprofits of their tax-exempt status as a way to generate money revenue for the state.

Rather, he will be seeking to have them simply file their federal disclosure forms with the state Tax Department so that state officials can at least see how much income they're generating.

And while Say and other key lawmakers are willing to provide more tax relief to isle residents, they are hesitant to commit to Cayetano's tax cut proposal until they at least learn how he intends to cover the $200 million to $250 million that the state would lose by lowering the personal income tax rate to 7.25 percent.

While Cayetano's goal of further lowering the personal income tax to attract businesses is laudable, Kalapa says excise tax reform is also needed as well as reforming government regulations, which he calls "a hidden tax."

Continental Airlines may have received a tax break to build an airline maintenance facility here, "but their employees still have to pay the high prices I'm paying," Kalapa says. "So was it such a great deal to locate to Hawaii? They've got to survive in the same environment that we have to survive in."

Kalapa adds: "Public policymakers have a singular opportunity this year. Observers anticipated change with the recent elections. Now it is up to those who were successful in those elections to make the necessary changes.

"If it is business as usual, then the outlook for Hawaii's economic future will continue to remain bleak."

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@ the Capitol Each state legislator has a government-assigned e-mail address. To send an e-mail, use the lawmaker's title ("rep" for representative, "sen" for senator) followed by the surname, then "@capitol.hawaii.gov". Example: Sen. Joe Blow would get e-mail at: senblow@capitol.hawaii.gov For lawmakers with the same last name, insert the first name's first initial before the surname. Example: Sen. David Ige's address is sendige@capitol.hawaii.gov, while Sen. Marshall Ige's is senmige@capitol.hawaii.gov. Also, Gov. Ben Cayetano's e-mail address is gov@gov.state.hi.us, while Lt. Mazie Hirono's is ltgov@pixi.com.