Posted on: Friday, June 24, 2005

ISLAND VOICES

By Mac Lowson

Hawai'i voters are facing the largest tax increases in the history of the state unless they act now to persuade Gov. Linda Lingle to veto two insidious bills to raise taxes starting July 1.

The first of these taxes is the controversial move to increase the general excise tax from 4 percent to 4.5 percent. The second doubles the conveyance tax on a median-priced, single-family home from $610 to $1,220. Both of these taxes will increase the cost of living and doing business in a state where we are already burdened with paying some of the nation's highest taxes.

Gov. Lingle is on record for being opposed in principle to tax increases. It's fair to say that most voters didn't elect her to raise taxes. This is her chance to prove it.

A half-percentage-point increase may not sound like much, but make no mistake, raising the GET by 12.5 percent amounts to the largest tax increase in Hawai'i's history. The law, which authorizes the counties to raise the excise tax, would generate an estimated $150 million annually in additional tax revenues in the City and County of Honolulu alone.

Raising the GET by just 12.5 percent will cost a family of four an additional $450 annually, according to the Tax Foundation of Hawai'i. That family is already coping with an annual GET burden of $3,585. That's because the GET applies to "all goods and services sold at all levels" statewide and has long been the major cash cow to support government bureaucracy.

The second of these taxes is the proposed conveyance tax increase, which is part of House Bill 1308, otherwise known as the Legacy Lands Act. This bill crept quietly through the 2005 legislative session on the heels of the controversial bill to raise the GET. The conveyance tax applies to "all real property transactions," including residential, commercial, industrial, hotel, resort, agricultural and conservation property sales.

You may have read a recent commentary by Rep. Brian Schatz extolling the virtues of the Legacy Lands bill, which is meant to fund land conservation and the preservation of open spaces. If that's true, why is more than one-third of the money — at least $12.6 million of the probably much more than $36 million estimated to be raised annually by the tax — going into the General Fund to pay for "a wide range of programs and initiatives"? If the higher rates go into effect, they would amount to a 60 percent increase in the conveyance tax collected and deposited into the General Fund.

Schatz says that for properties sold under the price of $600,000, there would be no tax increase, except for second-home buyers. This seems ludicrous because the median-priced home is now $610,000 on O'ahu, $665,000 on Kaua'i, and $780,000 on Maui. Equally disturbing is the fact that the Legacy Lands bill would affect sellers of commercial property even more. They would pay the biggest portion of this new tax; they just don't know it yet. Under the existing tax structure, a commercial property sold for $1 million would garner a $1,000 conveyance tax fee. Under the new law, the fee would increase to $3,000. The seller would also pay any capital gains tax.

How can we expect our economy to grow and prosper under this kind of excessive taxation? While I support the underlying intent of the Legacy Lands bill — to fund land conservation and the preservation of open spaces — I believe it is another example of a bill that started with all the right intentions but got hijacked by the Legislature to feed the state General Fund. Our elected officials should be looking for ways to reduce our tax burden — not increase it — as is the case with raising the GET and conveyance tax.

The time to act is now. Call, write or e-mail Gov. Lingle and let her know you don't want these tax increases.

Mac Lowson is president of the Hawai'i Association of Realtors®. He wrote this commentary for The Advertiser.