Denying tax breaks will cause backlash

THE ISSUE Legislative leaders have yet to decide what, if any, tax cuts to propose in the state's budget.

DEMOCRATIC legislators appear headed for a confrontation with Governor Lingle that could backfire in this year's gubernatorial race. If they fail to recognize that fiscal responsibility reflects political popularity, they will encumber their candidate with an impossible task.

Lingle has not wavered from her State of the State call for a $285 million tax-relief package, encompassing nearly half of the state's budget surplus of $574 million forecasts at the time of the address. She proposed a one-time refund of $150 per exemption, or $600 for a family of four. Her proposals would amount to a savings of $1,568 for a family of four.

That surplus now is expected to be $634 million for the current fiscal year ending at the end of June, and legislative leaders have yet to latch onto the idea of tax rebates. Instead, they seem to be working on the budget at a fast pace to override any vetoes by the end of the current session, as they did two years ago.

The governor has endorsed Senate President Robert Bunda's proposal to adjust income tax brackets by increasing the standard deduction. She also would be hard-pressed to veto legislation that would provide earned income tax credits needed by families at or near the poverty level. Lack of such credits now makes Hawaii the nation's the second-most regressive state among the 42 that impose income taxes.

House Finance Chairman Dwight Takamine says all the tax proposals "are still in play," but Senate Ways and Means Chairman Brian Taniguchi appears reluctant to offer broad tax cuts.

Most taxpayers recognize the need for improvements in Hawaii's public school system and in the University of Hawaii system. However, they will be furious if the state's huge surplus does not result in a tax break, and they can be expected to demonstrate their feelings at next year's polls.