Senate leaders will
kill tax hike

Bunda says he will
pull an embattled bill
to raise the excise tax

Health budget cuts decried

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By Richard Borreca
rborreca@starbulletin.com

State Senate leaders say they will kill tax increases this year.

Senate President Robert Bunda (D, Wahiawa-North Shore) said he will pull a Senate bill to raise the general excise tax 12.5 percent, to 4.5 percent from 4 percent, on which the House refuses to meet.

The Senate tax increase has been opposed for two weeks by the House Democratic leaders, and Republican Gov. Linda Lingle has said since January that this is not the year to raise taxes.

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Bunda yesterday noted that with "the House refusing to even negotiate on the issue, the Senate is tabling the proposal for this year."

The House tactic of refusing to negotiate drew complaints from Sen. Donna Kim, who said if one chamber refuses to even meet on the bill, there is no need to have conference committees.

"If every time the president or the speaker decides to kill something by not appointing conferees, why even have the conference process. To me, this is not a wise way to go about the process," said Kim (D, Kalihi Valley-Halawa).

Bunda is concerned, however, that without the added estimated $120 million a year that the increased tax would have generated, Hawaii's schools will suffer.

With schools lacking textbooks, and without enough money to repair the classrooms or even provide toilet paper, Bunda said, the extra money would have been a big help.

"Yet, the budget and legislation we're considering offer no substantive provisions to support education," Bunda said.

House leaders counter, saying they have fashioned a budget that doesn't need a tax increase to balance.

"We took a look at the GET increase and the different programs that would be funded and the concern is not that it actually would be putting funds back, but it would go for new programs," says Rep. Sylvia Luke, House vice speaker.

"We think we can balance the budget without a tax increase," she said.

While the Senate and Lingle disagree on a tax increase, there is agreement on changes to the state's high-tech tax credit program, Act 221.

Lingle said yesterday the changes would help the state balance the budget. Bunda agreed, noting that the state Council on Revenues lowered its tax collection estimates because of the generous tax credits.

Bunda reasoned that if the high-tech program was modified, the Council on Revenues might change the projections, which could result in the state having a larger projected tax base.

House members said, however, it is too early to change the tax credit plan and that, if needed, the plan could be changed next year.

"At this point we are not looking at making changes to Act 221," Luke said.

Lingle said that barring any changes, she is not expecting the Council on Revenues to increase its revenue projections at the next meeting May 9.

She said officials are preparing if lower projections are given: The state would consider restricting new hires including cutting hiring student help.