Posted on: Tuesday, July 29, 2003

Most counties keen on sales tax idea

By Lynda Arakawa
Advertiser Capitol Bureau

Citing home-rule issues, county officials yesterday told senators they'd like to have the authority to levy a sales tax.

The only county leader who opposed the idea was Maui Mayor Alan Arakawa, who said through his deputy finance director, Wayne Fujita, that he does not want to add $13 million in new taxes to Maui taxpayers.

They and others spoke before the Senate Tourism Committee about the idea to give counties more taxing powers. The measure stalled last session.

Under the measure, the counties could charge a 1 percent retail sales tax. If Honolulu did so it would lose all of its share of the hotel room tax, while the other counties would only give up half their portion if they levied the tax.

Honolulu City Council Chairman Gary Okino, council budget chairwoman Ann Kobayashi and Councilman Donovan Dela Cruz supported the idea.

Okino said it would spread the tax burden among more people, including tourists, rather than just property owners. The councilmembers also said the city needs the additional money to continue services.

Tax officials estimated a 1 percent sales tax would amount to about $120 million for Honolulu. The city's budget this year anticipates hotel tax revenues of $37.3 million.

Honolulu county was the only county willing to levy a retail sales tax immediately, while officials from other counties said they would like to have the option to do so in the future. The representatives of the counties, including Honolulu, also said they would want the state to collect the tax.

Kaua'i County Councilman James Tokioka said the council did not have formal discussions on the measure but that it was "always in support of home rule."

He said the council isn't looking at levying the tax but if the county's financial situation was in "dire straits" it would like to have the option.

Sen. Sam Slom, R-8th (Kahala, Hawai'i Kai), scoffed at the idea being a home-rule issue, saying "I see it as a tax increase.

"This is really a backdoor tax increase for the state," Slom said.

But Tourism Committee Chairwoman Donna Mercado Kim, D-14th (Halawa, Moanalua, Kamehameha Heights), disagreed.

"I think we're all looking for more money, to me that's up front," she said. "Either the state is going to impose an additional excise tax or we're going to allow the counties the home rule that they've wanted."

State Tax Director Kurt Kawafuchi reiterated that Gov. Linda Lingle supports home rule and thus does not oppose legislation to allow the counties to impose a sales tax. But he added that the administration does not support tax increases and that it does not want to collect the sales tax.

Carol Pregill, president of the Retail Merchants of Hawaii, said if counties levy a sales tax, businesses would be forced to shoulder additional costs to collect it. She also said higher taxes will anger consumers. The Honolulu Chamber of Commerce also submitted testimony opposing the idea.

The Tourism Committee will continue the discussion with county officials in October.