Revenue forecast boosted for state
By Derrick DePledge
Advertiser Capitol Bureau
In a signal that Hawai'i's economy remains strong, the state Council on Revenues yesterday substantially upgraded its forecast for this year and gave a more positive outlook for the next two years.
The forecast, which helps guide state spending, is more optimistic than the council's last projections in March and immediately revived talk at the state Capitol of tax relief for lower-income and middle-class workers.
The state Legislature dropped tax relief this year over concerns about slower revenue growth in the future and the financial impact of pay raises for government workers and teachers. But both Gov. Linda Lingle and Senate President Robert Bunda, who had called for tax relief, said yesterday that the state should have enough revenue to cover tax cuts next session.
The council's forecast yesterday predicted that the state would end the fiscal year in June with 14.6 percent revenue growth, up from a projection of 10 percent in March and 8.8 percent last September.
The rosier forecast, attributed to corporate and individual income tax growth and more successful collections by the state Department of Taxation, would mean an additional $158 million in revenue for the state.
The council also predicted 5.2 percent growth in 2006, up from 5 percent in March, and 5.3 percent in 2007, up from 4.9 percent.
"The revenues are coming in faster than we anticipated," said Jack Suyderhoud, vice chairman of the council and a professor of business economics at the University of Hawai'i at Manoa.
"It's a reflection of a pretty darn strong economy."
Bunda, D-22nd (North Shore, Wahiawa), had suggested in January that tax relief could take two sessions to negotiate. He said yesterday he believes that the state can afford to expand income tax brackets, so people would have to earn more before they pay higher tax rates, and increase the standard income tax deduction, which would remove some people from the tax rolls and provide tax breaks for others.
"I think this would be a perfect opportunity for the Legislature to consider giving the middle class a tax break," Bunda said.
Lingle said people should benefit from the state's vibrant economy and would again call for tax relief next session. "These measures will again include raising the standard deduction, providing a tax rebate on purchases of food, medical services and non-prescription medicine, offering tax credits for individuals who purchase long-termicare insurance, and other tax relief measures such as President Bunda's proposal to cut taxes for the middle class," the governor said.
Tax relief has not been as popular in the House, but House Speaker Calvin Say said yesterday that lawmakers are open to the idea. But he also said that spending to solve unmet needs in education, healthcare and affordable housing should come first.
"We remain open to some form of tax relief," said Say, D-20th (St. Louis Heights, Palolo, Wilhelmina Rise). "However, the state needs to be fiscally responsible. If we have any excess resources to spend, we must first address these critical needs in order to improve lives, even save lives."
Senate Minority Leader Fred Hemmings, R-25th (Kailua, Waimanalo, Hawai'i Kai), said the economy appears strong despite what he believes are ill-conceived public worker arbitration awards and misguided tax increases approved by the Legislature. "Once again we receive a projection reaffirming that Hawai'i's economy is booming despite the horrendous economic policies perpetuated by the Legislature," he said.
Reach Derrick DePledge at 525-8070 or ddepledge@honoluluadvertiser.com.
