Gov. Linda Lingle's decision to veto the so-called "transit tax" bill amounts to a high-stakes gamble on one of the biggest public works issues the state has faced in decades.

The measure is a county-option increase in the general excise tax from 4 percent to 4.5 percent. But Lingle says she doesn't like the fact that the state would collect the tax and keep 10 percent of the revenue for its own purposes.

If the Legislature can fix this problem, Lingle said, she would be happy to see the revised version become law.

The Legislature should come back into session and either override Lingle's veto straight away or — preferably — fashion a compromise that meets her needs as well as the needs of the counties.

The idea that Honolulu should set up a parallel tax collection system makes little sense.

The most efficient approach is for the state to collect the tax and then pass on the proceeds. The state should keep a small portion of the tax to cover administrative costs. But the full 10 percent is excessive. At that level, it appears the Legislature was using the "county-option" tax as a backdoor way to boost state general revenues.

The key thing is that this tax, even on a stand-by basis, is critical if Honolulu is to have any hope of winning federal cost-sharing for its transit plans. A local funding alternative must be in place for Uncle Sam to offer support.

This dispute must be resolved quickly and the law put on the books.