Wednesday, January 24, 2001
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Posted on: Wednesday, January 24, 2001

Effort to end food tax would run into veto

By Kevin Dayton
Advertiser Capitol Bureau Chief

A proposal to eliminate the 4 percent excise tax on food, rent and medical services is likely to be one of the biggest issues at the Legislature this year, but already the plan appears to have little chance of passing and faces a certain veto if it does.

Gov. Ben Cayetano said yesterday that even if the excise tax cut were approved by the House and Senate, he would veto the measure because it is too expensive and "not realistic."

The excise cut is a favorite proposal of Republicans at the Legislature, and an Advertiser survey found 41 of the 51 House members and 14 of the 25 senators favor the idea of eliminating it.

But Cayetano said the excise tax cut would cost the state about $230 million a year in lost revenue and would give a tax break to tourists as well as residents.

Cayetano said he prefers his own plan to reduce the top state income tax rate by 1 percentage point, and to adjust the rates in other tax brackets downward as well.

"The way I look at it, the more we cut taxes, the more Hawaii becomes attractive to business, and I think it’s a way to keep our economy strong," he said.

Cayetano said tax credits are another way the state could ease the burden of the excise tax on residents. For years, Hawaii offered tax credits to residents to offset cost of the excise tax, but legislators abolished those credits in 1995 and 1998.

House Minority Leader Galen Fox said the excise tax cut proposal would cost the state about $180 million, which he said is comparable to the cost of Cayetano’s proposed income tax cuts. He said residents would enjoy almost all of the benefits.

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