Tax-hike bill moves to full Senate
By Lynda Arakawa
Advertiser Capitol Bureau
A proposal to increase the general excise tax from 4 percent to 4.5 percent to raise $80 million more a year for public education passed the Senate Ways and Means Committee yesterday and is on its way to the Senate floor.
The committee approved Senate Bill 1626 along party lines with an 11-3 vote after a nearly three-hour hearing with Republicans voting against the measure. The bill would also provide a $100 food-tax credit intended to shift the tax burden from residents to tourists.
Senate Ways and Means Committee Chairman Brian Taniguchi, D-10th (Manoa, McCully), said he wants to keep the bill alive as an option if the state's tight budget situation worsens with a war or a drop in state revenue projections. He also has cited a recent Advertiser public opinion poll that showed most Hawai'i residents supporting a raise in taxes to improve public education.
Senate Ways and Means Committee vote on Senate Bill 1626 Yes: Democratic Sens. Brian Taniguchi, Russell Kokubun, Melodie Aduja, J. Kalani English, Willie Espero, Gary Hooser, Lorraine Inouye, Brian Kanno, Donna Mercado Kim, Norman Sakamoto, Shan Tsutsui No: Republican Sens. Fred Hemmings, Sam Slom, Gordon Trimble Excused: Democratic Sen. Cal Kawamoto
But critics said the proposal would hurt businesses and the poor, and that the Legislature should deal with tough budget matters by cutting spending rather than raising taxes.
SB 1626
Taniguchi said the bill is the only major tax increase proposal moving in the Senate.
But chances of it becoming law are extremely slim. If approved by the full Senate, the bill would move to the House, where it appears likely to face strong resistance from both Democrats and Republicans. Also, Gov. Linda Lingle has maintained she is against raising any taxes.
Taniguchi also said he would like lawmakers to explore rolling back some of the income-tax cuts the state made in recent years as an alternative to raising the general excise tax.
Public education officials and others yesterday supported the committee measure, saying it would boost public schools and improve the education system, while opponents, primarily business advocates, said it would hurt businesses and consumers.
Bette Tatum, state director of the National Federation of Independent Business, called the proposal "headshaking" as the state seeks to improve the economy and "dead-last-in-the-nation" business environment.
Lowell Kalapa, president of the Tax Foundation of Hawaii, said "merely tweaking up the rate will have a dramatic impact" on residents because the excise tax is levied at the wholesale as well as the retail level, resulting in a higher tax by the time the product reaches the consumer.
Kalapa suggested raising income taxes as an alternative.
Taniguchi said the tax increase would raise about $180 million each year.
