Lawmakers approve option for transit tax

By Derrick DePledge and Gordon Y.K. Pang
Advertiser Capitol Bureau

State lawmakers wrapped up their major work for the session last night, granting counties the option to raise taxes to pay for transportation projects, and increasing taxes on higher-end real-estate sales to help finance affordable housing and land conservation.

Democrats said they have taken important, if incremental, strides in responding to the quality-of-life pressures of everyday people. But Republicans criticized the tax increases as an additional and unnecessary burden and claimed that pay raises for government workers soaked up too much of the state's money.

"It's not just about raising your taxes," said Senate President Robert Bunda, D-22nd (North Shore, Wahiawa). "It's about transportation. It's about housing. If you live on the west side of the island, or in the growing areas of the Neighbor Islands, you understand that."

The final votes yesterday, after several hours of debate in both chambers, set up a largely ceremonial day tomorrow when lawmakers are expected to adjourn. Gov. Linda Lingle has not said yet whether she will veto any of the top bills, but if she does, lawmakers could return later for a special session to consider veto overrides.

Lingle said yesterday that she was disappointed in both the tax increase for affordable housing and the boost in the minimum wage. The governor said she wanted more money diverted to affordable housing but opposed the tax because it could raise the costs of housing. She said the minimum wage bill should have included a raise in the tip credit — the amount businesses can deduct from the hourly wages of a worker who earns tips — and a reduction in the amount businesses pay into the unemployment insurance fund.

"It was almost unexplainable why the Legislature didn't reduce the unemployment insurance tax," Lingle said. "I don't know how they could face anyone in the business community with their actions on that."

Dozens of bills are now headed toward the governor, from the sweeping — like the tax increases — to the quirky, like new signs on frozen baked goods and money to combat annoying coqui frogs.

The most intense exchanges were over giving counties the choice to add a 0.5 percent surcharge to the state's 4 percent general excise tax to pay for transit projects. If the Honolulu City Council approves the tax by the end of the year, the money would likely go for a rail project.

The Senate passed that tax bill yesterday afternoon, but the House was still considering it late last night. Sen. Will Espero, D-20th ('Ewa Beach, Waipahu), said Honolulu has passed up opportunities to finance rail in the past and lawmakers should have the vision not to make the same mistake again. "The only thing we can say now is that traffic congestion is worse," he said.

But Sen. Sam Slom, R-8th (Kahala, Hawai'i Kai), said the tax, charged on consumer and business activity, would be particularly damaging to poor people and small businesses. "It is a cruel tax," he said.

The Senate voted 19 to 6 to give counties the tax authority, while the House voted 32 to 19. Several senators voted with reservations, and the House vote was closer than anticipated, which could complicate an override if the governor vetoes the bill.

Lawmakers also differed on the state's two-year, $9 billion general fund budget, which is up slightly from the past two years.

House Finance Chairman Dwight Takamine, D-1st (N. Hilo, Hamakua, N. Kohala), said the budget "focuses on improving the quality of life in every community" by providing additional funding for education, the war on "ice" and other initiatives not included in the governor's proposal.

Republicans countered that it failed to contain any tax relief. Suggestions to increase the standard income tax deduction, establish a state earned income tax credit or expand income tax brackets all died last week.

House Minority Leader Galen Fox, R-23rd (Waikiki, Ala Moana, Kaka'ako), noted that $241 million in the next two years will go toward paying higher wages for workers tied to the Hawai'i Government Employees Association, the Hawai'i State Teachers Association and the United Public Workers. Fox blamed the binding arbitration law requiring the state to accept any arbitrated settlement with the HGEA for putting control over state finances into the hands of the government unions and leaving nothing left for tax relief.

"The principal job of the Legislature is to find money to fund public worker pay raises," Fox said.

Takamine said there was not enough money to go around. He noted the state Council on Revenues, which provides the revenue forecasts on which lawmakers base their budget, projected lower growth in the upcoming two years. "There will always be more needs than the state has the resources to provide for," he said.

Lawmakers also took steps to restrict aggressive or inexperienced drivers.

One bill would require drivers to stop and yield for pedestrians at marked crosswalks. Supporters say the bill will make it clear that pedestrians have the right-of-way. But opponents say they worry it would further endanger pedestrians because it assumes motorists will stop.

Teen drivers under 18 would need to obtain a provisional license between getting an instructional permit and a full license under another bill that was approved. A provisional license would limit number of passengers and hours of operation allowed and require a licensed parent or guardian in the vehicle late at night unless the teen was driving to or from work or school activities. A teen would be eligible for a full license after holding a provisional license for at least six months or after turning 17.

Among the more unusual bills advancing yesterday requires retailers to place signs near displays of bread and other baked goods that were previously frozen. Supporters said the bill is a consumer protection measure. Opponents said there is no evidence that such goods are unhealthy.

Meanwhile, the Big Island and Maui would receive $100,000 each to fight the coqui frog, and Kaua'i and Honolulu would get $50,000 each.

Staff writer William Cole contributed to this report. Reach Derrick DePledge at ddepledge@honoluluadvertiser.com or 525-8070.