Senators push
excise tax hike

Skepticism greets the Democrats’
proposal to increase taxes
for public education

---

By Bruce Dunford
Associated Press

The state Senate's Democratic leaders are floating a 12.5 percent hike in the state's general excise and use tax rate -- to 4.5 percent from 4 percent -- offset by a $100-per-person food tax credit.

The tax increase coupled with the tax break would net about $90 million, which would go into a special fund to support public schools and the University of Hawaii, avoiding spending cuts now anticipated.

Legislature Directory Legislature Bills & Hawaii Revised Statutes

Speaker Calvin Say (D, St. Louis Heights-Wilhelmina Rise) said the House would look at the proposal if it passes the Senate, but said he is concerned the Senate bypassed the usual legislative hearings process.

Senate Ways and Means Committee Chairman Brian Taniguchi said the surprise draft measure, which will be aired at a hearing tomorrow, is based on a recent newspaper poll that showed wide public support for a tax increase, if the proceeds go to public education.

The excise and use tax hike would bring in an additional $180 million with some $90 million going back in the food tax credit, leaving the rest for education, said Taniguchi (D, Moiliili-Manoa).

"We're creating a special fund so that it would be clear that the money was earmarked for education," he said.

One premise in the bill is that much of the tax hike burden will be shifted to Hawaii's 6 million annual tourists, who will not be able to claim the $100 food tax credit, Taniguchi said.

"The resident taxpayers will get it back, and we're pretty much exporting it to the tourists," he said.

The Senate's combination tax hike-tax break proposal was mentioned to House leaders during a private meeting between House and Senate leaders late yesterday afternoon, Taniguchi said.

"They're kind of skeptical," he said, adding he expects the same reaction from Gov. Linda Lingle, who has vowed to oppose any tax increases.

However, if the Council on Revenues lowers its projection on revenue growth when it meets March 13, "we're looking at additional moneys we're going to have to cut," Taniguchi said.

"If the revenue projections are lowered, then (Lingle's) going to have to do a balanced budget, and it's going to impact her financial plan," he said.

The measure "keeps our options open," he said.

A public opinion poll published two weeks ago by the Honolulu Advertiser indicated a majority of state residents are willing to pay more taxes if it means improved public schools.

Some 77 percent of the 603 residents surveyed by telephone Jan. 25 to 30 said they would pay more taxes to improve the quality of public school education, the newspaper reported. The poll had a margin of error of 4 percentage points.