Mayor says state,
not city, should cut
its tax on gas

Mayor Mufi Hannemann says Gov. Linda Lingle can go ahead and give up the state's 4 percent general excise tax on gasoline sales to provide relief to motorists.

But don't look to the city to forgo its gas tax revenues, he said.

Hannemann said the city would have a budget deficit of $26 million under a proposal offered by Councilman Charles Djou for suspension of the city's 16.5-cents-a-gallon gasoline tax for six months.

"We balanced our budget on that county tax of 16.5 cents. That is very important to operate TheBus with; that is very important to do the pothole repairs," Hannemann said. "So we need those revenues. What he's suggesting is really now going to take our budget out of balance."

But the governor should go ahead on a state tax break to give drivers some relief from rising fuel costs brought about in part by the state's gas cap law, the mayor said.

"I think she should look very seriously at that," Hannemann said.

Lingle spokesman Russell Pang said the administration is still researching whether the governor has the power to suspend the general excise tax on gas sales.

"The governor said earlier that she is looking into what could be done to provide relief at the general excise tax level," Pang said. "She's not sure administratively what can be done, because the Legislature has the authority to lower or raise the (general excise) tax."

Pang also reiterated the governor's long-standing opposition to the gas cap law.

The city is facing a $5 million to $10 million shortfall as a result of rising fuel costs.

He called it "bad timing" that the gas cap started at the same that Hurricane Katrina stalled oil production in the Gulf Coast region, one of the areas where the state looks to determine weekly gas prices under the gas cap law.

"I can recognize why they felt they had to do it, but obviously, of course, I think you also have to be very willing and flexible with the current situation," the mayor said.

He said that before the counties proceed with any tax suspension measures, the governor and the state Legislature should make the first move.

"I think the state should step up. They created the gas price cap, and therefore they should be offering a panacea or solution for it," Hannemann said. "I think the governor should look very carefully at the general excise tax."

Unlike the city's fuel tax, which remains constant, revenue received through the general excise tax goes up as wholesale gas prices go up, Hannemann said.

"I'm thinking if you're looking at the option of giving our taxpayers relief, I think that's where the windfall is -- it's on the GET," Hannemann said.

City Council Chairman Donovan Dela Cruz agreed with the mayor.

"The state has a lot more flexibility than the city just because they have that surplus," Dela Cruz said.

He said the city is already grappling with the projected budget deficit as a result of rising fuel prices.

"I don't want to see cuts in service. I don't see cuts in service that will affect people's quality of life. I hate to see once less garbage pickup, or less bus routes or less officers using vehicles," he said.

Consumer Protection Chairman Sen. Ron Menor (D, Mililani) urged caution in talk of suspending taxes, because it could affect state services.

"I am open to any proposal that would reduce the tax burden on the people of Hawaii," Menor said, while adding, "I'm concerned that such a proposal to cut taxes would also reduce funds that are needed to fix our schools, repair our roads and other important programs and services."

Menor said that if taxes for businesses such as oil companies go down, they could reap wider profit margins without necessarily passing the savings to consumers.