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Proponents hailed the plan as a "last chance to do something about gridlock," while opponents condemned it as "a rail to nowhere."
The measure, House Bill 1309, cleared the Senate with the five Republicans and Democrat Sen. Shan Tsutsui voting no. The bill also passed in the House late last night.
Mayor Mufi Hannemann, who campaigned last year on a promise to push through a rail transit system, saw yesterday's legislative action as a sign that there is growing momentum for rail.
The rail plan, which calls for a transit line to be built between Kapolei and Waikiki and eventually extending to the University of Hawaii at Manoa, is estimated to cost at least $2 billion.
"We are all in this together," Hannemann said yesterday after the transit tax plan won Senate approval.
Under the plan, the county councils have until December to authorize the tax increase to 4.5 percent from 4 percent. The state's general excise tax is levied on all goods and services in Hawaii and is charged on every exchange of money, including at the wholesale level.
Lowell Kalapa, executive director of the Hawaii Tax Foundation, has said the increase would cost the average resident about $450 a year.
Hannemann noted that to help ease the political problem of raising taxes in an election year, the transit tax would not be collected until 2007.
Critics said the transit system is not worth higher taxes.
"This would be the biggest single tax increase in the history of Hawaii," said Sen. Sam Slom, (R, Diamond Head-Hawaii Kai). "Every single survey shows that the people are overwhelmingly opposed to this tax increase."
Sen. Gordon Trimble (R, Downtown-Waikiki), noted, "We will be building something you will not use."
But Sen. Willie Espero (D, Ewa, Kapolei, Ewa Beach), who represents Leeward Oahu areas with severe traffic congestion, said the demand for mass transit is real.
"Our residents demand this bill," Espero said. "We have to have some vision."
The next stop for the transit tax bill is at Gov. Linda Lingle's desk.
She originally backed a transit tax increase in 2003, but dropped the issue and now says she is in favor allowing the counties to raise the excise tax for whatever they want.
While Lingle has declined to say what she would do with this transit tax proposal, Hannemann said he thinks Lingle will not oppose it.
"I don't see a problem ... The bill is designed to give the counties the option to decide for themselves, so I don't see this being problematic for her," Hannemann said.
Lingle has said she will wait to see what measures make it to her desk before committing to signing them, but one aide says the governor has never wavered in her support of giving counties more taxing authority.
"This bill, at least as it seems to have come out, provides that and puts the onus on each one of the counties to take a specific vote on whether or not they want to increase the taxes on their specific residents," said Linda Smith, Lingle's senior policy adviser.
Recalling that the Honolulu City Council rejected a similar tax increase plan in 1992, Hannemann said last night that Honolulu's traffic has become so much more congested that there is a new demand for solutions.
"People can see the growth we have had and now they believe we need something," Hannemann said.