Isle House leader rejects tax cuts despite surplus

The expected surplus should go to repair schools and roads, says Rep. Calvin Say

Forget about any major changes or cuts to state taxes this year despite a growing surplus -- unless there is public support for them, House Speaker Calvin Say says.

In meetings with Star-Bulletin editors and reporters, Say urged caution, saying neither a tax rebate nor a tax cut is needed this year.

Say's position is likely to pit him against both Senate President Robert Bunda and Gov. Linda Lingle.

So far, the Republican governor's tax plan, although unspecified, is the most expensive.

In her budget message to the state Legislature last month, Lingle said up to half of the surplus, $300 million, should go to tax reductions, credits and perhaps rebates.

The governor has said a large amount of the extra tax money should go back to taxpayers through "substantial tax relief," proposed in legislation.

Meanwhile, Bunda (D, Kaena-Wahiawa-Pupukea) has expanded calls for tax changes to include Lingle's suggestion of increasing the standard deduction.

Changes to the standard deduction, which has not changed since 1984, could return up to $20 million to working poor, Bunda said.

In past State of the State speeches, Lingle has called the standard-deduction increase "more than a tax issue -- it is a matter of social justice."

This week, Bunda said he thought the Legislature should wait for the spring revenue projections and that if they continue to climb, the state could lower taxes this year.

But Say (D, St. Louis Heights-Wilhelmina Rise) argued this week that despite the surplus of nearly $600 million, the state cannot afford every tax cut suggested.

"We have close to a dozen tax credit bills in committee. ... What is the priority?" Say said.

"I have the Screen Actors Guild coming after me because they want a 14 percent movie tax credit, I have five colleagues pushing for a tax credit for Hawaii Raceway Park, I have the health guys talking about medical tax credits, there is a food tax credit, there is a solar tax credit, heat pump credit ... The list is endless," Say said.

Bunda said the House and Senate disagree about the need this year for tax cuts.

"It hasn't been exactly peaches and cream. We disagree about it," Bunda said.

But Say said, "If there is overwhelming public sentiment for some tax reform, I think the House would be open to it."

Also, Say said the Senate Democrats would have to isolate a specific tax proposal "and let all others fall through the cracks -- maybe the House would be open to it."

Republicans are expected to make tax cuts a big part of their legislative campaign, according to Sen. Sam Slom.

"We are five solid for reform. I say we should give the money back to the people who paid the taxes," Slom (R, Diamond Head-Hawaii Kai) said.

But Say said the state Constitution does not require a tax rebate until the state has had a surplus for two years in a row, and that will not happen until 2007.

Say said the money that would go to a tax reduction would be better spent repairing neglected schools and roads throughout the state. Also, the state Tax Review Commission will have a set of recommendations at the end of 2007, and the Legislature should wait until it is completed before giving money away through tax cuts.