Senate panel OKs A bill to raise the state's excise tax to help fund education won approval from the Senate Ways and Means Committee yesterday, propelled in part by Hawaii's uncertain economic climate.
tax boost for schools
By Susan Essoyan
sessoyan@starbulletin.com
"We are concerned about the state of the current budget and also about the possibility of war," said Committee Chairman Brian Taniguchi (D, Moiliili-Manoa). "Even though our members don't want a tax increase, we have to keep that option open."
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Senate Bill 1626 would raise the general excise tax rate to 4.5 percent from 4 percent and offset the hike with a $100 food tax credit for local residents. The move, designed to shift the burden to tourists, is projected to net $80 million, to be earmarked for education.
Committee members voted along party lines, 11-3, with the Republicans opposed. The bill is expected to go to the Senate floor for a vote next week. It needs the support of just two more senators to have a majority, but its future in the House is unclear.
The Lingle administration has promised not to raise taxes, and her deputy director of taxation, Kurt Kawafuchi, urged the committee to defeat the proposal. Business groups also opposed it.
"My blood pressure shot up when I saw this bill," said Bette Tatum, state director for the National Federation of Independent Business. "Our small businesses are the backbone of our economy. You don't want to kill them, you want to bring them in."
But education officials and social service groups said it was about time someone considered raising revenues for important programs, rather than simply cutting budgets.
"The proposed cuts are deep ... and will dismantle the safety net that now cares for the people of Hawaii," Debbie Shimizu said on behalf of the Hawaii chapter of the National Association of Social Workers. She and several others suggested raising the excise tax further and earmarking a similar amount to health and human services.
The state Council on Revenues is expected to lower its forecast for tax revenues next month, and the prospect of war with Iraq also looms large in the economic picture.
Lowell Kalapa, president of the Tax Foundation of Hawaii, testified as expected against raising the excise tax. He surprised his audience by advising senators to consider raising the income tax instead if necessary to balance the budget.
"I think you should think about the next 60 days and events that will strike at the heart of our economy," Kalapa said. "My feeling is that if we come to the point where we're not going to have the revenues because visitors don't come, the income tax is far more progressive."
Taniguchi agreed to incorporate the idea into his committee report and later said he had never heard such a suggestion from Kalapa, a perennial tax opponent.
