Posted on: Saturday, June 25, 2005

Lingle threatens veto of tax hike for transit

By Gordon Y.K. Pang
Advertiser Staff Writer

Gov. Linda Lingle has told lawmakers she may veto a bill that would increase the state excise tax to pay for a multibillion-dollar Honolulu transit project and transportation projects on other islands unless she receives assurances that the state won't get a share of those revenues.

Senate and House leaders said yesterday they are considering her request.

At stake is a plan to raise the state general excise tax to 4.5 percent from the current 4 percent, a tax hike that would collect an estimated $150 million annually in additional revenue. Estimates are that it would cost the average family of four anywhere from $245 to $450 more a year.

Monday is the deadline for the governor to announce her intention to veto bills passed by the Legislature this year. Vetoes formally must be submitted by July 12, the same day the Legislature must convene in special session if lawmakers want to override any vetoes.

House Speaker Calvin Say, D-20th (St. Louis Heights, Palolo, Wilhelmina Rise), said members of the Lingle administration have made it clear that the governor intends to include the transit tax "as part of her list of potential vetoes" but did not say she would veto it.

Bill Brennan, spokesman for Honolulu Mayor Mufi Hannemann, said city officials are not concerned by Lingle's move to place the tax increase bill on her list of potential vetoes.

"The governor had indicated to the mayor that she would take all the time she has legally to consider whether or not to sign the bill, veto the bill or let it become law without her signature," Brennan said. "So it's really of no great concern that it's on the list."

At the heart of the disagreement is who is to administer the new charge and how much it will cost to do so.

Lingle, a former mayor of Maui County, has stated repeatedly that she supports giving more taxing authority to the counties. She objects to the section in the bill passed by lawmakers this May that calls for the state to administer the new surcharge. Even more pointedly, Lingle said she objects to a stipulation that the state keep 10 percent of new taxes collected, which would amount to an estimated $15 million.

Administration officials believe the amount that would go toward the state far exceeds what it would cost to administer and distribute the tax and have suggested that the remainder would amount to an intended windfall for the state treasury.

State Tax Director Kurt Kawafuchi said even with ballpark estimates, it would cost no more than about $3.5 million annually in administrative costs.

Senate President Robert Bunda, D-22nd (North Shore, Wahiawa), said he agrees with Lingle that "certain corrections are in order."

"The crux of the matter is a change in the bill that would allow the counties to administer and collect the tax themselves, thus allowing the counties to keep 100 percent of the tax increase less the cost of collection," Bunda said. "We will address the governor's concerns and her specific requests when she presents them to the Legislature next week."

Presumably, lawmakers could take up the change in authority when it reconvenes in January since the new tax is not supposed to be in effect until Jan. 1, 2007.

Say said leaders in the House are reviewing the issue and that the Democratic caucus will take up the matter next week. Say said he is not worried about the bill's prospects. "At this point, I would not consider the bill to be in jeopardy," he said.

Late Friday, Lingle spoke for about 90 minutes with a group of about 15 business leaders who asked that she veto the bill. The meeting was convened at the request of Sen. Sam Slom, R-8th (Kahala, Hawai'i Kai), who is also president of Small Business Hawai'i.

Walt Harvey, a real-estate salesman and a Small Business of Hawai'i board member, said business people reiterated for Lingle their concerns that the bill is regressive and most affects low-income residents, as they would need to pay more for food, medicine and housing.

Lingle also told them that she is putting the bill on her list of potential vetoes, Harvey said, although she did not explain why and made no further promises.

Putting the bill on the list, Harvey said, "doesn't say she's going to veto it, it says she reserves the right to do so."

Nestor Garcia, chairman of the City Council's Transportation Committee, said he could support a change giving authority over the additional tax to the counties. "Last I checked, public transit was a city responsibility," Garcia said.

Reach Gordon Y.K. Pang at gpang@honoluluadvertiser.com or at 525-8026.