Sunday, January 14, 2001
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Posted on: Sunday, January 14, 2001

End of food tax favored

By Kevin Dayton
Advertiser Capitol Bureau Chief

As the legislative session opens, a majority of lawmakers in the House and Senate favor eliminating the 4 percent excise tax on food and rent, a step that would save Hawaii taxpayers about $150 million a year.

However, the chairmen of the House Finance and Senate Ways and Means committees aren’t embracing the idea. House Finance Chairman Dwight Takamine and Ways and Means Chairman Brian Taniguchi said the state doesn’t appear to be so flush it can hand out new tax cuts.

The state imposes the general excise tax in lieu of a sales tax. It is levied on almost all retail and wholesale transactions within the state, and is the largest single source of tax revenue for the state. It generates about $1.5 billion a year.

Legislators also indicated in a survey by The Advertiser that Gov. Ben Cayetano’s proposal to convert the Ala Wai Golf Course into a park may fail. A majority in the House said they oppose the idea.

A majority in both the House and Senate also said they favor a privately operated prison in Hawaii, and want to raise the state minimum wage above the current $5.25 an hour.

The opening day of the Legislature is Wednesday, and lawmakers are expected to consider all of those issues this year.

Eliminating the excise tax on food, rent and medical services is a favorite theme of Hawaii Republicans, and was included in the goals announced by House and Senate Republicans last week. The Republicans said legislators should reduce the size of state government to offset the loss of money from the tax cuts.

House Minority Leader Galen Fox, R-21st (Waikiki, Ala Wai), said he believes the House Republicans will force a floor vote on excise tax relief if the Democrats try to kill it in committee. The broad support for eliminating the tax on food and rent shows Democrats understand what the public wants, he said.

Food and medical are concerns

"The people of Hawaii really are concerned about paying a tax on food and medical services," Fox said. "When they hear about it, it really bothers them, and I’ve think we’ve got some representatives who have their ear to the ground and basically understand that’s what popular sentiment is."

A state tax researcher estimated eliminating the excise tax on food sold in stores would cost the state about $100 million in lost tax collection. Eliminating the excise tax on rent would reduce state tax collection by about $67 million a year.

Takamine, D-1st (Hamakua, N. Kohala), said exempting those areas would cause "a very substantial hit" to state government finances. He said he does not know if an excise tax relief proposal will be included in the package of bills backed by the House Democrats.

And Takamine noted there are other demands being made for more money for human services and higher and lower education, for things such as textbooks, smaller class sizes, teacher raises and more classroom computers.

"I think we cannot lose focus of the fact that there are many needs that we want to try to address, especially focusing in on the public school system, and we’re going to need the resources to do it," he said.

Taniguchi also expressed reservations, noting that many of his fellow Senate Democrats want to give raises to public workers. He said there seems to be little interest in the Senate in a tax cut.

"I guess I’m concerned mainly about the financial impact that it may have," he said. "I guess it’s a little premature to rule it out. It’s a very popular concept, but at this point we want to be responsible."

The state used to give residents tax credits to offset the cost of the excise tax on food and medical services, but abolished those tax credits in the mid-1990s.

In other issues covered by the survey, lawmakers expressed little support for Cayetano’s proposal to close the Ala Wai Golf Course and convert it into a park.

More park space

Cayetano said the urban area needs more park space, and initially suggested the course could be replaced with new links on Sand Island. State and city officials also are considering buying an existing course to replace the Ala Wai.

The Legislature will have some say over the proposal because lawmakers can vote to reject any executive order from Cayetano that would change the use of the land under the course.

It would take a majority vote in both the House and the Senate or a two-thirds vote in either to reject the proposal.

Fox said that Cayetano is trying to move too fast with his executive order.

"If you want to create a central park in the Ala Wai Golf Course, you’ve got to do something about creating a substitute 18-hole public municipal golf course in urban Honolulu," he said. "You just can’t come in and take golf away at the busiest golf course in the United States without having a substitute facility."

Advertiser Staff Writer Lynda Arakawa contributed to this report.

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