Lingle unveils tax plan

House Speaker Calvin Say says the proposal for $346 million in tax reductions is too much

Gov. Linda Lingle is proposing tax cuts worth $346 million to Hawaii residents over two years, but Democrats in the state House say it is too much.

During a news conference yesterday at the state Capitol, Lingle said she will propose that the Legislature lower or cut portions of state excise taxes, income taxes and gasoline taxes.

"Our residents are struggling with the high cost of living, and they will continue to fall further behind unless we provide immediate and long-term tax relief," she said.

TOP ITEMS OF A $346 MILLION TAX PLAN » Annual tax adjustment for inflation. State would adjust the standard deduction, personal exemption and tax brackets yearly in response to inflation. Worth $10 million per year. » Raise standard deduction to 75 percent of the federal standard. Worth $30 million to state taxpayers. » Cut tax on basic foods. The general excise tax on milk, dairy products, eggs, canned fish, cereal, juices, peanut butter, beans, carrots, infant formula and infant cereal would be eliminated. Estimated to be worth $55 million during two years.

But House Democrats, led by House Speaker Calvin Say, said there are requests for $317 million more than the $4.9 billion Lingle wants to spend for all state general fund appropriations.

And, Say added, the public-employee unions could get pay raises of 7 percent and 9 percent, which would cost an additional $500 million.

"Right now, we are spending more than we are taking in," said Say (D, St. Louis Heights-Wilhelmina). "Let's go slow."

The Lingle administration estimates the state's budget surplus at $736 million.

Lingle is not saying how much the state is budgeting for union pay raises, but she insists the state can afford tax cuts.

Lingle pointed to her plan to eliminate the general excise tax on 11 basic foods, described as her latest attempt to lower the tax on food.

"No one should have to pay a tax for the privilege of eating," Lingle said.

Lingle hopes that the public will pressure lawmakers into cutting taxes.

"I think it will be difficult to vote for taxing infant formula," Lingle said.

Lingle has consistently urged that the state change its standard deduction, which has been criticized as being a burden on low-income families and the working poor.

Last year, the Legislature raised the standard deduction to 40 percent of the federal level. Lingle said it should be at least 75 percent of the federal level.

"Adjusting the standard deduction has long been recommended by tax experts, including every tax review commission since 1985," Lingle said.

Also included in her tax package is a one-time refund of $100 per person for families with household incomes up to $100,000. Those with incomes of more than $100,000 would get refunds of $25 per person.

Some sort of refund is required by the state Constitution. Whenever the state's general fund balance is more than 5 percent of general fund revenues after two years, the state must return an unspecified refund.

Refunds have ranged from $1 to $100 in past years.

Lingle estimated that the refund would put $90.8 million back in the hands of taxpayers and dependents.

Say said the tax rebate is probably the one portion of Lingle's tax plan likely to survive.

"We have been looking at some sort of a giveback," Say said.

But he warned that the state has "unmet needs" and millions of dollars in requests from public schools and universities that could diminish any tax cuts.

Last year, Lingle asked the Legislature for more than $280 million in tax cuts and was able to get only about $50 million in cuts.

PLAN WOULD BOOST EXEMPTIONS, OFFER REFUND Here are other proposals in Gov. Linda Lingle's $346 million tax plan: » Increased personal and family exemptions. Includes $1,000 exemption for each child 18 or younger for those with incomes under $100,000, and $500 per child for those with incomes more than $100,000 and up to $200,000. Also increases dependent-care services credits to $5,000 from $2,400. It is worth $26 million a year. » Gas tax credit. Extend the biofuels tax credit, which is 11 cents on every gallon of gas sold. If not approved, Hawaii drivers will pay $32 million more for gas during the next two years. » Tax refund. One-time tax refund of $100 per person for families making up to $100,000, and $25 per person for families making more than $100,000. Some refund is required by the state Constitution when the state surplus is more than 5 percent for two years. The refund would return $90.8 million. » Vehicle exemption. Vehicles owned by National Guard and Reserve members would be exempt from state and county taxes and registration fees. Estimated savings of $2 million a year. Source: Gov. Linda Lingle