State tax revenues down, reversing trend

By Kevin Dayton
Advertiser Capitol Bureau Chief

State tax collections for September dipped to about 1 percent below collections for a year ago, and things will get worse before they get better.

The September tax collections do not reflect the plunge in tourist arrivals and retail spending triggered by the Sept. 11 East Coast terrorist attacks. The September tax collections released yesterday by the state were for taxes imposed on August's transactions and payroll.

For the first three months of the fiscal year that began July 1, the state collected $789 million, or about 1.9 percent more than was collected in the first quarter last year.

However, the state Council on Revenues estimated tax collections would grow by 4.1 percent this year, meaning tax collections were lagging a bit behind the levels that were expected even before the attacks. The council estimates are the basis for the state budget.

"I guess we're a little surprised at that because we had felt the economy was doing a little better in most of the sectors," said Senate Ways and Means Chairman Brian Taniguchi, D-11th (McCully, Mo'ili'ili, Manoa). "We're not clear as to why that is, why the collections were that low."

As for next month's tax collections, Taniguchi said, "We know it's going to be pretty low . . . The question is how quickly things will rebound."

Lowell Kalapa, president of the Tax Foundation of Hawai'i, said there were signs the state economy was "slipping" even before the attacks.

In the first three months of the fiscal year that began July 1, general excise tax collections grew by 1.5 percent. That tax, which is imposed on everything from retail sales to rent, is considered a good indicator of overall business activity.

Hotel tax collections increased by 7 percent in the first quarter, while personal income tax collections increased by 1.2 percent.