Legislators repeal gas cap and pass tax measures on last day

Tax cuts and higher cigarette prices are due as the Legislature closes to mixed reviews

»INSIDE: Last day for seven veteran lawmakers.

State taxes are going down, the price of cigarettes is going up and you are on your own when it comes to the price of a tank of gas.

The state Legislature closed the books on its 2006 session yesterday by retiring its 8-month-old experiment in gasoline price reduction, indefinitely suspending the gasoline cap.

Legislators said their constituents told them the gas cap was not lowering the price of gasoline, and with an election looming in November and gasoline prices rising, they did not want to be blamed for the increases.

"The people out there didn't believe it was doing what it was supposed to do," Senate Vice President Donna Kim said after the session ended.

"Part of it was because of the complicated formula, and part the PUC (Public Utilities Commission). So many people were confused, and nobody knew if it was working or not," Kim (D, Kalihi Valley-Halawa) said.

In the House, Rep. Hermina Morita, an early supporter of the gas cap, gave up the fight.

"At this time there is no political or public will to have the gas cap continue," Morita (D, Hanalei-Kapaa) said in a floor speech.

Republicans have opposed the measure since its inception in 2001, but it was not until the price controls went into effect last August that they have been able to claim political victory.

"The gas cap has been in effect since last summer, and as predicted it has failed. It's not surprising because history shows and history tells us that price caps never work, never have worked, never will work," Rep. Mark Moses (R, Makakilo-Kapolei) said.

Led by Republican Gov. Linda Lingle, the band of 15 GOP legislators cheered on the bill to lower income taxes, increase the standard deduction for the working poor and give relief to flood victims. Several, however, said the $58 million package was tiny compared with the $600 million surplus.

"This is a tax relief measure. It is too small, and it doesn't take effect until 2007 but the measure also has in it flood relief statewide, which is very good. And of course any tax relief is better than none," Moses said.

"The people should be here with pitchforks and torches," said Sen. Sam Slom (R, Diamond Head-Hawaii Kai). "The surplus comes from overtaxing our residents."

House Speaker Calvin Say defended the work, saying, "It's been a great year for all of us, for the general public at large. We've addressed all sectors of our economy and community."

The Legislature did raise the tax on cigarettes, starting next year, with a 20-cent-a-pack increase for each of six years. The extra money will go to help support the University of Hawaii medical school, community health centers and emergency health services.

Rep. Dennis Arakaki (D, Alewa Heights-Kalihi), Health Committee chairman, explained, "There was no intention to hide that this is a tax because the studies have shown that taxes on cigarettes do prevent young people from becoming daily smokers, and that's who we want to target."

But others, such as Rep. Cindy Evans (D, Makalawena-Waimea) said, "My concern about the cigarette tax increase -- to really be honest about what we're doing -- I think it's a tax increase. I don't think it's about stopping people from smoking."

The Legislature ended on a slightly sour note yesterday as some last-minute negotiating between the House and Senate ended with the House locking the Senate out when the senators came over with their traditional notification that they were ready to adjourn.

Senate Democrats had passed a revision to the state campaign spending law that would have restored what corporations could give to political campaigns, but a last-minute lobbying campaign by citizen groups persuaded House members not to vote for the changes.

In what was interpreted as retaliation, the Senate recommitted a bill, heavily supported by House Democrats, that would have taken $100 million from the state treasury to be used for high-technology grants over four years.

"I don't think we have ever been locked out of the House," said Senate President Robert Bunda (D, Kaena-Wahiawa-Pupukea).

Last year, the Legislature amended the campaign spending law, and the Campaign Spending Commission interpreted it to mean that corporations could give only a total of $1,000 during an election. Previously, corporations, like individuals, could give much more money, limited only to $6,000 for governor and lieutenant governor candidates and $4,000 for all others in an election.

The failure of the campaign spending bill, according to Sen. Colleen Hanabusa, Judiciary Committee chairwoman, means that the interpretation stands.

"You can give a total of $1,000. That is, you can give 10 people $100 or give all $1,000 to one person, but you can give only $1,000," Hanabusa (D, Nanakuli-Makua) said.

On the other side, citizens groups, such as Voter Owned Elections Hawaii, have been lobbying for publicly financed elections and elimination of corporate contributions. They said the House rejected the changes because of their lobbying.

"We've been raising hell from every island. We have organized for seven years, and we did it with plain-old grass-roots lobbying, sign waving and canvassing," said Scott Foster, communications director of Voter Owned Elections.

LEGISLATURE ENDS FOR THIS YEAR Some highlights from the final day of 2006 legislative session: » Passed a suspension of the wholesale gas price cap. » Approved a tax cut package that saves taxpayers nearly $50 million. » Levied an additional 1 cent tax on each cigarette sold in the state, starting in late September. An additional cent will be added each year until 2011. » The House rejected a bill that would have helped the state Department of Taxation update its computer system, while potentially pushing Hawaii toward a tax on Internet purchases, failed to get the approval of the House, effectively killing the measure. » The Senate voted downa bill to annually drop $25 million in state revenues into a new fund to encourage high-tech projects.