Posted on: Thursday, March 3, 2005

Increase in excise tax would fund rail, credits

By Gordon Y.K. Pang
Advertiser Capitol Bureau

Taxpayers could get a rail system and tax relief, too, under a new excise tax increase proposal that cleared a state Senate committee yesterday.

Senate Bill 1366 will be heard on the Senate floor in the coming days.

The legislation would allow the state to raise the excise tax on goods and services from 4 percent to 5 percent — if the city can approve a transportation plan by Jan. 1, 2006. The state would then increase the tax on Jan. 1, 2007, said Senate Ways and Means Chairman Brian Taniguchi. His staff estimated the tax would net between $320 million and $350 million annually.

The proposal calls for earmarking $200 million of the proceeds for the city's transit project for 10 years.

Maui and Hawai'i counties would each receive $20 million annually while Kaua'i County would get $10 million, all for general transportation projects.

Taniguchi, D-10th (Manoa, McCully), said the remaining revenues would go toward tax relief, including the return of the food and medical tax credit for those filing income taxes, which would amount to about $50 per person. Money would also be used to raise the standard deduction on income taxes, he said.

At the end of the 10 years, Taniguchi said, the tax would be revisited. "There may be some need for operations money," he said.

The three Republicans on the committee voted against the new draft. "This is, pure and simple, a tax increase bill," said Sen. Sam Slom, R-8th (Kahala, Hawai'i Kai). State lawmakers are already pushing out bills that would increase conveyance taxes and various fees while the city is also looking at fee hikes. "We are trying a backdoor approach to further tax the people."

Under the old draft of the bill, counties would be given the authority to increase the excise tax to 5 percent for a rail transit project or other transportation improvements.

Sen. Donna Mercado Kim, D-14th (Halawa, Moanalua, Kamehameha Heights), a former city councilwoman, said she is dubious the city will be able to approve a transit plan by the end of the year.

Honolulu City Council Budget Chairwoman Ann Kobayashi said it doesn't matter to her if the state or city manages the tax so long as the city is assured of a local funding for the rail project.