Bill could cancel tax rebate

Money could go into a rainy-day fund if voters agree to amend the state Constitution

A tax rebate mandated by the state Constitution could be canceled under a bill being considered at the Legislature.

Senate Republicans are criticizing Senate Bill 3040, which would give voters a chance to amend the Constitution to allow the Legislature to cancel the mandated tax rebate. Instead of returning the rebate, legislators would have the power to deposit the money into the state rainy-day fund and save it.

According to the state Constitution, whenever the general fund balance at the close of two consecutive fiscal years exceeds 5 percent of the general fund revenues, the Legislature must refund or credit the excess to taxpayers. The 1978 Constitutional Convention crafted the amendment creating the rebate, and voters ratified it.

The Legislature is not required to give a rebate this year, but budget analysts expect that the state's surplus will continue through next year and trigger a refund in 2007.

"It is a way to circumvent the Constitution," GOP leader Sen. Fred Hemmings (R, Lanikai-Waimanalo) said of the latest proposal.

Sen. Sam Slom added, "This amendment would remove any possibility for anyone getting a refund. It gives the state a chance to spend more of the taxpayers' money."

Slom (R, Diamond Head-Hawaii Kai) recalled that during Hawaii's boom period of the 1980s, Hemmings was in the state House and "lobbied to get a $125-per-taxpayer rebate."

"Any rebate is always a help, but it all shows that we are taking too much money from taxpayers," Slom said.

Hemmings called the proposal "a plan for government to set up a savings account when taxpayers don't have enough money to pay their bills."

Critics have said that in some years the surplus is so small that taxpayers only get a $1 rebate which satisfies the Constitution, but that takes more than $1 million out of the state treasury.

Sen. Brian Taniguchi (D, Moiliili-Manoa), Ways and Means Committee chairman, who introduced the bill, was not available yesterday to comment on the measure.

The Senate is expected to vote on the bill this week. If it is approved by the Legislature, the amendment would still have to be approved by the voters in the fall election before it could take effect.

The Ways and Means Committee report on the bill said, "The measure will provide the Legislature with the necessary flexibility to determine the best way to dispose of excess revenue."

The measure was first referred to the Senate Judiciary Committee, but that committee steered clear of endorsing the measure, saying just that the proposal had no technical flaws.

"Your Committee conducted a legal review of this measure but notes that the subject matter of this bill is within the purview of the Committee on Ways and Means," the committee report read.

In committee, Slom, Hemmings and Sen. Gordon Trimble (R, Downtown-Waikiki) voted against the measure.

The measure also is opposed by the Lingle administration.

In her State of the State speech in January, Lingle had asked the Legislature to consider a one-time rebate of $150 a person for single individuals earning $50,000 or less, heads of household earning $75,000 or below and married couples earning $100,000 or less.