Legislators and governor clash on extent of tax cuts

Budget issues will hit Lingle's $120 million plan, lawmakers say

With time running out this session, House and Senate Democratic leaders are considering tax cuts of between $30 million and $50 million, while Republican Gov. Linda Lingle is still pushing for $120 million in annual state income tax reductions.

House leaders, however, say Lingle has already asked for $77.8 million in other emergency spending measures, and there is not enough money in the state's $4.7 billion budget to handle more tax cuts.

"She is correct; there are resources available -- but at the level she is requesting, I would say I don't know," House Speaker Rep. Calvin Say said in reaction to Lingle's latest round of lobbying.

Lawmakers have only today and tomorrow to complete work on a tax bill before the Legislature adjourns next Thursday.

Yesterday, Tax Director Kurt Kawafuchi sent the Democratic leadership a new chart showing how various economic groups would fare under four different versions of Lingle's tax plan.

The biggest savings would go to a family of four with an adjusted gross income of $39,900, who would save between $605 and $811 in taxes every year.

All four scenarios include increasing the standard deduction to between 40 percent and 75 percent of the federal deduction, which would cost the state at least $11 million in lost taxes.

Both Say (D, St. Louis Heights-Wilhelmina Rise-Palolo Valley) and Senate President Robert Bunda are looking at increasing the number of tax brackets instead of lowering the standard deduction as one way of helping the most taxpayers.

Expanding the number of brackets would mean that more people would pay less than the maximum state income tax rate; that would help 80 percent of the taxpayers, Say said in a interview.

Lingle, however, repeated yesterday her contention that Hawaii's coffers are full and that the state can afford to return more money.

"I hope they are able to identify additional funds between now and the end of the session, and I'm confident that they can," Lingle said yesterday at a news conference.

The governor also signaled that the role the Legislature plays in cutting or not cutting taxes is likely to be a campaign issue in the fall.

"I think this is a general feeling across the community," Lingle said. "The Legislature is out of step if they don't recognize how serious an issue this has become.

"It's simply becoming too much for the average person to stand, and they have to have tax relief," Lingle said.

Bunda said the Senate Ways and Means Committee is still working to fit all the other money requests into the state budget, and that is limiting how much is left over for a tax cut.

"Depending on some of these money bills surviving or dying, we may use some of those dollars for tax reform," Bunda (D, Kaena-Wahiawa-Pupukea) said.

Say called it "anybody's ballgame."

"The Senate is looking at between 30 and 40 million; we maybe can go up to $50 million," he said.

The problem, according to Say, is that a portion of the state's $600 million surplus has already been spent this year in emergency requests from Lingle.

The governor asked for $11 million to prepare for a possible pandemic flu outbreak, more than $7 million for increased electricity charges and $11 million because of recent floods, and is expected to ask for $5.5 million for improvements to the Hawaii Youth Correctional Facility to avoid federal sanctions. Other Lingle requests bring the total to $77.8 million, according to the House Finance Committee.

"In the past six weeks, her requests have added up to a big chunk of change," Say said.

He said the Legislature is readying a budget that will include an extra $160 million in cash to be spent on public school construction and an extra $30 million for University of Hawaii construction.

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