Lingle offers tax cuts for the poor

Low-income families would pocket $1,568 under the proposal
The governor also adopts Bunda's plan for fairer tax brackets

If most Republican tax packages call for giving tax breaks to the rich, in hopes that the money saved will go to new investments, Gov. Linda Lingle is running against the grain by urging tax cuts for working families.

Lingle's $285 million tax plan will help the poor, she said yesterday after her State of the State address.

2006 STATE OF THE STATE >> Lingle offers tax cuts for the poor >> Democrats will consider rebate plan >> Lawmakers, DOE contradict Lingle on school funds >> Lingle asks $18 million for charter schools >> Full text of Lingle's speech online >> Downloadable PDF of Lingle's speech

"Our tax system hurts the poor, probably more than in any other state," said Lingle, whose plan focuses on families with income of $50,000 a year or less.

Lowell Kalapa, Hawaii Tax Foundation executive director, called it "pandering to the poor and the middle class," noting this is usually "a Democratic thing."

Two of the three points in Lingle's tax plan borrow from the Democrats.

First, she credits Robert Bunda, Senate president, who signaled the tax reform debate last year by saying the middle class is being hurt by not changing the tax brackets. Bunda, noting that someone making $50,000 was in the same tax bracket as a millionaire, said the tax brackets should be widened.

Lingle adopted that idea, saying Bunda's plan was "critically important."

Bunda said yesterday that he still supports the idea but that the Legislature will have to look at exactly how much the entire tax package will cost and if the state can afford it.

Lingle's other borrowed tax plan idea is the tax credit on food, medical services and nonprescription drugs.

The bill would give residents earning $50,000 or less a $150 tax credit to offset the excise tax paid on food and medicine.

Before 1995 the state offered several tax credits to help the poor pay the GET, but to balance the budget during a deficit, the tax credits were repealed. Lingle now proposes bringing them back.

"Lingle's strategy is, 'Are you going to pass my package, or are you against poor people?'" Kalapa said.

Lingle also is lobbying for an increased standard deduction. She says that her standard-deduction changes and Bunda's tax bracket change "would reduce the tax burden on 81 percent of taxpayers.

An estimated 57,866 residents would no longer have to pay state taxes, Lingle said.

Lingle is also calling for a one-time tax refund of $150 per person, for those who make less than $50,000 a year.

Kalapa and Bank of Hawaii economist Paul Brewbaker say this thinking runs counter to the traditional GOP plan of "trickle-down economics."

"This is not the Republican plan in the sense that people in high end create jobs and we need to re-evaluate their taxes," Kalapa said.

Brewbaker described Lingle's plan as an "eclectic mix."

"She is not cast in any mold. She has elements of both parties," Brewbaker said.

For herself, Lingle, who so far has no declared Democratic opponent, says her tax plan "was constructed in an integrated fashion to help more than 850,000 taxpayers and dependents."