Posted on: Friday, April 4, 2003
Senate committee OKs bills to increase sales tax
By Gordon Y.K. Pang
Advertiser Capitol Bureau
That $1 Spam musubi that costs you $1.04 after factoring in the general excise tax could go as high as $1.06, under bills that cleared the Senate Ways and Means Committee yesterday.
But even if the two bills make it out of the full Senate Tuesday, they still need to contend with the House and Gov. Linda Lingle.
The Senate committee approved:
• House Bill 1554, which would allow the counties to impose a 1 percent sales tax on goods and services in exchange for giving up their share of hotel room tax revenues back to the state.
• House Bill 510, which would increase the existing 4 percent excise tax to 4.5 percent. Two-thirds of the extra money raised by the tax increase would go to education-related programs.
The cumulative effect of the two bills is that consumers would pay a 5.5 percent tax on purchases.
Both bills moved out with objections from Senate Republicans, who said it was wrong to increase taxes at a time when many families are struggling financially.
The latest version of the sales tax, unveiled yesterday by Ways and Means Chairman Brian Taniguchi, would require the City and County of Honolulu to decide by Aug. 1 whether it would impose the 1 percent sales tax, and begin collecting it on Jan. 1. If it does, it would lose all of its share of the hotel room tax.
The three remaining counties — Maui, Hawai'i and Kaua'i — would have until Oct. 1 to decide. Any of the Neighbor Island counties seeking to impose a sales tax would still be able to obtain half their percentage share of room tax dollars.
The city is projected to collect $120 million annually from a 1 percent sales tax and would be giving up about $34 million in room tax dollars. The other counties, if they chose to implement a sales tax, would each gain about $1 million more than they do now, said Taniguchi, D-10th (Manoa, McCully). Any money left over by the counties would go into the state general fund.
Unlike the excise tax, which is levied at the wholesale as well as the retail level, a sales tax is imposed only on the final consumer purchase.
Senate Democrats who were once county council members hailed the bill as a means of bringing home rule to the counties. "For decades, the counties have asked for additional taxing powers in addition to property taxes," said Sen. Donna Mercado Kim, D-14th (Halawa, Moanalua, Kamehameha Heights), once a longtime City Council member.
But Sen. Sam Slom, R-8th (Kahala, Hawai'i Kai), echoed the concern raised by business leaders who testified yesterday that taxpayers are already overburdened.
"This a backdoor approach for yet another state tax increase," he said. Fellow Republicans Fred Hemmings, R-25th (Kailua, Waimanalo, Hawai'i Kai) and Gordon Trimble, R-12th (Waikiki, Ala Moana, Downtown) joined Slom in voting against the bill.
Honolulu City Council Budget Chairwoman Ann Kobayashi, whose committee is holding annual budget briefings at City Hall, said she backs the idea of a county sales tax so it can avoid increasing property taxes and fees, and other steps to help balance its budget.
Lingle told reporters she endorses giving taxing authority to the counties, but the former Maui mayor was not happy when told that the amount of the tax, as well as the time frame for implementation, had been set in the Senate bill. "That's not home rule," she said. "Let's wait and see what comes out."
The House, to date, has chosen to not hold a hearing on the bill. House Speaker Calvin Say, D-20th (St. Louis Heights, Palolo, Wilhelmina Rise) said he wants to gauge the sentiment of the majority of members in the Senate and City Council before deciding whether he will recommend that members of the House approve it — if it comes over again from the Senate.
The committee also voted to advance a half-percentage-point excise tax increase plan that would net the state about $180 million in revenues. About $120 million would go toward different education programs, $50 million to a food tax credit for lower income families and between $9 million and $10 million to raise the income tax standard deduction.
Education programs initially were to receive only $80 million, with more for the food tax credit. But several senators said they believed a larger share earmarked for education would be more palatable to taxpayers.
Senate Republicans remained skeptical. "I don't see it getting into the classroom," Trimble said.
Lingle and Say also appeared cool to the news that the half-percentage-point excise tax increase was advancing. "To be talking about an excise tax increase at this time is not in anyone's best interest because the House even isn't going to go along with them," Lingle said.
Say said that at his last count, all 15 Republicans and 15 to 17 Democrats in the 51-member House were "adamantly opposed" to an excise tax increase.
