City keen on sales tax proposal
By Lynda Arakawa
Advertiser Capitol Bureau
Honolulu city Managing Director Ben Lee yesterday said the city would push to charge a sales tax if the Legislature gives it the authority to do so.
The Senate is considering allowing the city to impose a sales tax of up to 1 percent in exchange for giving up its $34 million share of hotel tax revenues. Under the Senate's draft of House Bill 1554, approved by the Senate Tourism and Transportation, Military Affairs and Government Operations committees, the hotel tax money would be distributed primarily among the rest of the counties.
Yesterday was the 37th day of the 60-day session.
There are discussions in the Senate, however, of transferring a portion of the hotel tax money to the state general fund and perhaps allowing all counties to levy a sales tax.
Lee said it would be premature to discuss details of such a tax, but that officials would consider certain exemptions to a retail sales tax. He said levying a sales tax would allow the county to spread the tax burden among more people rather than rely largely on property taxes.
Tax officials have estimated a 1 percent sales tax would amount to about $120 million for Honolulu.
But Lee acknowledged it may be difficult to sell the sales tax proposal to the public, especially property owners who may not see a reduction in property tax rates.
"That's the issue. They would pay property taxes, and now we have a sales tax. So now we have to look at some balance to see whether that would be acceptable," he said.
Gov. Linda Lingle said she supports the bill.
"I've always supported giving the counties their own taxing authority," she said. "I think it's a home-rule issue. It's something that the county leaders, both mayors and councils, will have to answer to their constituents for. I don't feel it's appropriate to just say one county can have this authority and not the others. It's a basic home-rule issue."
Meanwhile, Senate Republican leaders said they don't want to support anything that results in a tax increase.
"The governor has always been consistent in her support for home rule and so are we," said Sen. Sam Slom, R-8th (Kahala, Hawai'i Kai). "But we've also been consistent in opposing any tax increases.
While Lingle's position is that it would ultimately be up to the counties to decide whether to impose taxes, the Harris administration's historic lobbying for such authority would mean it would be almost inevitable on O'ahu, he said. "It would be basically mandating a tax increase," Slom said.
The House version of the bill would allow the City and County of Honolulu to charge a 0.5 percent excise tax in exchange for giving up its share of the hotel room tax. If HB 1554 passes the Senate, it will go to conference committee for House-Senate negotiations.
An excise tax is levied at the wholesale as well as the retail level. A sales tax is imposed only on the final consumer purchase.
Advertiser Staff Writer Gordon Y.K. Pang contributed to this report. Reach Lynda Arakawa at larakawa@honoluluadvertiser.com or 525-8070.
