Business leaders come out against rail tax

By Derrick DePledge
Advertiser Capitol Bureau

The Hawai'i Association of Realtors and other business leaders are organizing to fight any increase in the state's general excise tax to pay for transportation, putting new pressure on legislators as they prepare to negotiate the size of a tax surcharge.

Realtors went from office to office at the state Capitol yesterday and are actively urging people in the community to oppose a tax increase. The Chamber of Commerce of Hawai'i and the Retail Merchants of Hawai'i also are opposed, telling lawmakers that taxes should not be raised without more detailed plans for mass transit.

"We want to make sure it doesn't happen," said Mac Lowson, the president of the real-estate group, who believes a tax increase would only push the cost of living, including housing, higher.

The state Senate Ways and Means Committee agreed yesterday to give counties the choice of adding a 0.5 percent surcharge to the 4 percent general excise tax. The Senate would give the Honolulu City Council until the end of the year to approve a tax surcharge. Honolulu would have to use the money collected from the surcharge on a $2.6 billion rail project and the new tax would not take effect unless the county receives federal matching money. Neighbor Island counties would be able to use the new tax money on their own transportation priorities.

The state House has approved a 1 percent county tax surcharge for transportation, and lawmakers will have to resolve the size of the surcharge and their other differences in conference committee. Tax experts estimate that a 1 percent surcharge would raise about $300 million a year and a 0.5 percent surcharge would raise about $150 million.

Hawai'i's congressional delegation has said there has to be some form of local tax commitment to qualify for federal money for rail. O'ahu planners have discussed a rail line between Kapolei and Iwilei that would give commuters on the growing Leeward side of the island an alternative to crowded roads and highways.

State Sen. Brian Taniguchi, D-10th (Manoa, McCully), chairman of the Ways and Means Committee, said he shares concerns from Republican lawmakers that not enough is known about the total costs and details of a rail project.

But Taniguchi said obtaining federal transit money is "dependent that we take this leap of faith."

Senate Democrats also want to give people a tax credit to offset some of the impact of a tax surcharge. People at the lower end of the tax scale would receive up to $50 through the credit, while people in the highest bracket would get $10. The credit would cost about $22 million and would be taken from the money raised by the surcharge.

But Taniguchi also said he wants to give counties the option of raising motor vehicle taxes to cover some of the operating and capital costs of rail. The tax, based on the value of a vehicle, would be on top of the existing vehicle weight tax. It is modeled after a similar tax in Seattle that is being used to help pay for a monorail.

Senate Republicans said lawmakers should not be pushed into adopting a tax increase and should look for other transportation options for O'ahu, including new toll roads. "We're being asked to pay in advance for a concept that hasn't been finalized," said state Senate Minority Leader Fred Hemmings, R-25th (Kailua, Waimanalo, Hawai'i Kai).

Although many people, particularly commuters on the Leeward side, have told lawmakers they support rail, opponents of a tax increase are becoming more vocal. "I'm so tired of the opposition talking about how we can't have a tax increase," said Darrlyn Bunda, executive director of the Waipahu Community Association. "I don't want to pay a tax any more than anyone else. But we have to fund improvements to our transportation system."

Jim Tollefson, the president of the Chamber of Commerce, said traffic is a quality-of-life issue but he wants to see more detailed plans for rail.

Carol Pregill, president of Retail Merchants of Hawai'i, said retailers oppose any tax increase but also believe West O'ahu residents should be asked whether they would use rail before any project moves forward. "It appears that we are being compelled to accept this so we can get the federal money," she said.

Reach Derrick DePledge at ddepledge@honoluluadvertiser.com or 525-8070.