NEWS ANALYSIS
Governor urges help for state's have-nots
By Derrick DePledge
Advertiser Capitol Bureau
Gov. Linda Lingle spoke yesterday of a Hawai'i of great optimism, a place of confidence, where "people see good things ahead, and believe the future is bright."
Richard Ambo • The Honolulu Advertiser
Beneath the hopeful tone of her State of the State address, though, there was recognition that the economic prosperity that has lifted the Islands has left too many people behind. The Republican governor, like the House and Senate Democrats who opened the state Legislature last week, said she wants to use some of the state's revenue growth on tax cuts for the lower and middle classes.
Hawai'i Gov. Linda Lingle acknowledged the state's prosperity has left some behind.
With the luxury of finally having some money to spend after years of austerity, tax relief, and other steps to soften the impact of Hawai'i's high cost of living, has become a driving theme of this session.
"Hawai'i has a lot of benefits. It's a beautiful place to live. But it's really hard sometimes," said Matt Martin, an eighth-grade science teacher who lives in Hale'iwa. "It's something I want to see brought up more often."
In her speech, Lingle said job growth and low unemployment had people feeling good about Hawai'i again, but she acknowledged that prosperity has not been enjoyed by everyone. Her words were similar to Senate President Robert Bunda's description last week of a state of "haves and have-nots," suggesting that both leaders are responding to lower- and middle-class frustrations.
"There are too many families in our state struggling to survive and too many families just a paycheck away from moving in with relatives or living on the beach," the governor said. "It is hard to be optimistic when the price of rent, food and medical care is going up faster than your wages."
Lingle outlined a $63 million tax cut over the next two years, gradually raising the standard income tax deduction and providing a tax credit on food and medical services for people earning less than $40,000 a year. The governor estimates that raising the standard deduction would remove 27,000 low-income people from the tax rolls, because they would no longer earn enough to be taxed after the adjustment, and give another 78,000 people a tax break. The tax credit on food and medical services would be $27 per person in the first year and $55 per person in the future, covering as many as 515,000 people, or 40 percent of the state's taxpayers.
Richard Ambo • The Honolulu Advertiser
Lingle also said she would end the current practice of cutting welfare payments for parents who get jobs, using $58 million in federal welfare money for cash payments of up to $240 a month to about 10,000 parents.
Gov. Linda Lingle, with House Speaker Calvin Say, left, and Senate President Robert Bunda applauding, recognizes the families of deployed service members during her State of the State address.
The governor has called for raising the standard deduction before — and at one time wanted to eliminate general excise taxes on food and medical services — but believes the Legislature may be more inclined to consider her ideas this session as part of a broader discussion on tax relief.
The Legislature is likely to review at least two other tax-cut scenarios. One, favored by Bunda and targeted at the middle class, would expand income tax brackets so married couples would not have to pay the highest rate of 8.25 percent until they earn $100,000 a year, instead of $80,000. Tax experts estimate that the change would cost the state an estimated $59 million in lost revenue a year, so it would be more expensive than Lingle's plans. Another would add a state tax credit on top of the federal earned income tax credit aimed at lower- and middle-income workers with children.
The state Tax Review Commission has recommended both raising the standard deduction and expanding the income tax brackets.
"We'll have to see which vehicle we want to go with. We haven't added it all up," said Sen. Brian Taniguchi, D-10th (Manoa, McCully), the chairman of the Senate Ways and Means Committee, adding that any tax relief would likely be modest and targeted. "I don't expect that it's going to be anything large."
Tax relief may have to compete with affordable housing and transportation as priorities this session. The political risk, some analysts say, is whether Lingle and House and Senate Democrats can deliver before the economy slows. "What better time to try to solve issues of inequity than when you have the money?" said Carl Bonham, an economist at the University of Hawai'i-Manoa. "This is a good opportunity."
Reach Derrick DePledge at ddepledge@honoluluadvertiser.com or 525-8070.
