Legislators may let city levy sales tax

By Lynda Arakawa
Advertiser Capitol Bureau

The Senate is considering allowing the city to levy a sales tax of up to 1 percent on top of the state's 4 percent general excise tax.

Yesterday was the 36th day of the 60-day session.

The Senate Tourism Committee votes on the bill today.

Senate Tourism Committee Chairwoman Donna Mercado Kim said a sales tax would be less of a burden on businesses and consumers than the general excise tax, which is levied at the wholesale as well as the retail level, resulting in a higher tax by the time the product reaches the consumer.

The House's version of the bill, supported by officials representing every county, would have allowed the Honolulu city government to impose a general excise tax surcharge in exchange for the hotel room tax. Gov. Linda Lingle expressed support for the bill this week, saying it falls in line with county home-rule principles.

Kim, D-14th (Halawa, Moanalua, Kamehameha Heights), said that Honolulu receives about $31 million in hotel tax revenue and that tax officials estimate a 1 percent sales tax would bring in about $120 million for Honolulu. She said the city could decide to exempt certain goods, such as food, from the sales tax.

Five percent of the sales tax revenue would go to the state Tax Department to administer the tax.

Senate Ways and Means Committee Chairman Brian Taniguchi, D-10th (Manoa, McCully), said that rather than hand off the city's share of the hotel tax revenue to be distributed among the other counties, he is interested in taking a portion for the state general treasury.

"We're looking for revenues," he said, noting the impact of lower revenue projections and a war.