State Senate
OKs raising taxes

But the move to hike the general excise
tax by 12.5 percent faces a fight in the House

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By Richard Borreca and Pat Omandam
rborreca@starbulletin.com | pomandam@starbulletin.com

The Senate approved tax increases and eliminated high-tech tax breaks yesterday to balance the state budget.

The approval to increase the general excise tax by 12.5 percent to provide an extra $120 million for public schools and the University of Hawaii came despite Republican opposition.

The Senate also approved a new budget plan, House Bill 200, that calls for spending about $3.6 billion, or about $145 million more in the next fiscal year than last year.

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Gov. Linda Lingle's proposal for a balanced budget was accomplished by a series of controversial cuts earlier this year.

She called for reductions of up to 5 percent for the general-fund portion of the budget and carrying those spending restrictions through the next two years of the budget.

Ways and Means Committee Chairman Brian Taniguchi (D, Manoa) attacked the Lingle administration during floor debate yesterday, saying Lingle has cut the education department's budget by $3 million and retracted $8 million for charter schools.

Sen. Sam Slom (R, Diamond Head-Hawaii Kai) defended Lingle, saying her education budget was larger than the Senate version.

The Senate version also amends Act 221, in accordance with Lingle, to limit eligibility for high-tech tax credits. The changes are expected to save $55 million, according to Lingle and the Senate Democrats.

The GET increase, to 4.5 percent from 4.0 percent, also provides a food tax credit of up to $80 and increases the standard deduction for low-income workers. But the bill faces a difficult time in the House, which has refused to approve a tax increase this year.

According to the Senate bill, the extra money would go to the 42 school complexes on a per-pupil basis for repair and maintenance and for other public school projects as the Legislature deems appropriate.

Meanwhile, the House approved two proposed investment tax credits forwarded by the Senate.

Senate Bill 1619, SD2, HD2, would provide tax credits for a motor sports center, as well as a public safety training and education facility, at Kalaeloa.

And Senate Bill 377, SD1, HD2, would provide yet-undetermined tax credits for development of an aquarium and marine research facility at Ko Olina. That measure is similar to a bill vetoed last year by then-Gov. Ben Cayetano that would have provided a 10-year, $7.5 million-a-year tax credit for the project.

Proponents said the project would boost the economy and provide jobs in the Leeward area. But opponents said it forces taxpayers to invest in Ko Olina and sets a dangerous precedent.