Don't even think about changing the tax-rebate mandate

THE ISSUE A bill would allow legislators to divert revenue surpluses from taxpayers to a reserve fund.

LAWMAKERS seeking to give themselves the power to decide what to do with surplus revenues that the state Constitution now requires be returned to taxpayers don't seem to be in touch with reality. Proposing an amendment that would allow legislators to stash surpluses in a "budget reserve fund" appears to be an exercise in futility. Taxpayers would be unlikely to approve such a change when many are still struggling to make ends meet despite the state's healthy economy.

Moreover, lawmakers are looking at the swelling state treasury from the wrong viewpoint. With revenues predicted to rise 9.5 percent through the rest of the current fiscal year, legislators should not be focused on how to cache the excess, but on how to reduce taxes, especially for low- and middle-income people.

At present, the Constitution directs the Legislature to give taxpayers refunds or credits whenever the general fund balance at the end of two successive fiscal years exceeds 5 percent of revenues in each year.

A bill introduced by Senate Ways and Means chairman Brian Taniguchi would allow the Legislature the option of diverting the extra money to a reserve fund. The rationale, reports the Star-Bulletin's Richard Borreca, is that there are years when the surplus is so small, it is hardly worth the cost and trouble of returning funds to taxpayers.

Perhaps so, but lawmakers' efforts with the bill are off point. What Hawaii needs is to change a tax structure that takes $373 a year from a single-parent family of three with income at the federal poverty level of $15,577, that extracts $470 from a two-parent family of four with poverty-level income of $19,961, that collects $185 from a two- dependent parent earning just $13,000 at a minimum-wage job.

Lawmakers' attention should be aimed at increasing the standard income tax deduction that has not changed for more than 20 years even as costs for food, fuel, housing and health care continue to go up. Revising tax brackets also would lighten burdens on the poor and middle- income taxpayers.

With a vigorous economy, the Council on Revenues' 2006 estimate of growth has been revised upward by 1.5 percent from 8 percent in December. Though more cautious for 2007 because of the slowing construction industry and less-than-hoped-for tourist numbers, the state's surplus is expected to again to reach or exceed the 5 percent trigger for refunds.

The bill to amend the Constitution appears to anticipate the surpluses and reflects legislative desire to call the shots on where the money will go.