March meeting to decide
feasibility of isle tax cut

Democrats' package contains
support for mass transit and
an excise tax increase

The March Council on Revenues meeting will determine if the state has enough money for a tax cut this year, according to veteran House Finance Chairman Rep. Dwight Takamine.

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Takamine (D, Hawi-Hilo) called the state's booming economy "generally positive," but he cautioned that the $4.4 billion budget submitted by Gov. Linda Lingle is not complete.

"Even with the budget the governor submitted, there were a number of pukas," Takamine said in an interview.

For instance, Lingle did not include funds for public employee pay raises that are now under negotiation.

The key economic questions to be answered by the Democratic majority in the Legislature are whether to give a tax break, estimated at around $60 million, and whether to allow the counties to raise the excise tax to 5 from 4 percent to fund a mass transit system.

Takamine said the House Democrats' package includes support of mass transit and the ensuing tax increase.

"We have a majority package. We need to determine whether this Legislature is going to go along with that, at least in addressing transit," Takamine said.

"It is part of the majority package, and I am going to rely on leadership, so I would imagine that it would clear the House," Takamine said.

At the same time, the Senate is proposing lowering income tax rates to give tax breaks to the middle class. Lingle has proposed tax cuts for the working poor. The House is also exploring income tax credits.

"We may wind up with the same situation where there are all these needs and the amount of financial resources are less than the amount needed," Takamine said.

Senate President Robert Bunda, who is calling for middle-class income tax cuts, said he was encouraged that Takamine has not dropped the idea of tax reductions.

"I applaud the chairman for being open to discussion. I am very hopeful, and I feel that the economy has picked up and we now can look at a tax reduction," Bunda said.

Takamine, who has been Finance Committee chairman since 1999, said it was premature to factor in a tax cut.

"At this point tax cuts are one option. If what we want to do is improve the quality of life for families, then how do we best do that?

"Maybe we have resources to invest -- lowering taxes generally is seen as improving the quality of life," Takamine added.

But the state's budget is built on the tax collection projections made by the state's Council on Revenues. In January the council predicted the state's economy would grow by 8.8 percent. The council meets again in March, and that new figure will guide the budget deliberations.

"I think the March Council on Revenues numbers will be very significant," Takamine said. "That will be the key to determining how much room there is to take care of all the other needs."