Legislators expect 'token' tax relief this election year

Gov. Lingle repeats her call for major tax-law revisions

Just 13 weeks ago, Gov. Linda Lingle was telling the Legislature and taxpayers that "you can have it all."

That "all" has shrunk significantly.

The state's booming economy had prompted Lingle to urge the Legislature to cut income taxes, drop the tax on food and medical services, and give a one-time tax refund.

The Legislature has failed to support Lingle's plan -- but might adopt small portions of it.

Yesterday, Lingle repeated her request for significant tax changes to Hawaii's tax laws. "I think 20 percent of the surplus is what they should work on, so that would be about $120 million.

"It is very important that people receive tax relief, and the sooner the better," Lingle said during an afternoon news conference in her office.

Her fellow Republicans in the House and Senate, however, doubt that Democrats, who control the Legislature, will loosen the purse strings.

"It is going to be slim to none," Sen. Fred Hemmings, GOP Senate leader, predicted.

If there are any changes to the tax laws, Hemmings (R, Lanikai-Waimanalo) said he expects only "token relief because it is an election year."

"I hear they are planning on saving a little money for token relief, but we have a lot of problems, not the least of which is that the poor are taxed at a higher rate than almost anywhere else," Hemmings said.

Since becoming governor, Lingle has lobbied for a change in Hawaii's standard deduction, which has not been changed since 1989.

Married couples would be able to claim a deduction of $7,500 instead of the $1,900 they can deduct today, Lingle said in January.

In the House, GOP leader, Rep. Lynn Finnegan confessed, "I am getting a little nervous."

"We have to do something to help the poor and the middle class," Finnegan (R, Mapunapuna-Foster Village) said.

On Sunday, to move the tax bills along, tax director Kurt Kawafuchi sent a letter to House and Senate Democratic leaders asking for action on tax bills now in conference committee.

One bill, Senate Bill 1740, would adjust the tax brackets to "more rationally reflect Hawaii's high cost of living," Kawafuchi said.

The other bill in conference, Senate Bill 97, has been stalled for more than a year. It would change the standard deduction, and Kawafuchi said there is a special urgency.

"As a result of Alabama's recent enactment of tax relief measures, Hawaii is now the state that taxes the poor the most," Kawafuchi said.

"Increasing the standard deduction is the right approach because it helps more people, it is simple to understand, and assists those families, the poor and the average family, struggling to cope with Hawaii's high cost of living," Kawafuchi argued.

Democrats say that calls for tax cuts are just part of the state's financial demands.

Senate President Robert Bunda said the Legislature is also swamped with calls for grants and money for other programs.

"We have to accommodate not just the governor's requests, but those requests that are coming in droves," Bunda (D, Kaena-Wahiawa-Pupukea) said.

And while Lingle is expecting the state's surplus to grow even larger, Bunda said that at some point Hawaii's tax collections "will level off, and we are going to have to start socking money away."

Bunda, who has been an early supporter of tax reductions, says there is still a chance that some tax changes will happen this year.