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The Honolulu Advertiser
Posted on: Wednesday, December 27, 2006

Excise tax increase won't rush shoppers

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By Greg Wiles
Advertiser Staff Writer

When it comes to tax increases, maybe those changes below the decimal point aren't something to get too excited about.

With a 0.5 percentage point increase in the state general excise tax less than a week away, it appears O'ahu shoppers aren't hurrying to buy big-ticket items. Retailers report mention of the higher tax is prompting some folks, who otherwise are wavering on a purchase, to pull out their checkbooks. But for many others, the increase isn't a factor.

"I'm not going to get a car tomorrow because I'm going to pay $400 more in taxes next year," said Honolulu resident Juleanne Liu, 34, who's in the market for a European sports sedan. "I wouldn't rush a decision."

The general excise tax on O'ahu rises to 4.5 percent (or a maximum of 4.712 percent as the tax itself can be taxed) on Monday from 4 percent (or 4.166 percent) now. The tax increase is part of the state's effort to help fund a rail transit project on O'ahu. The tax will add an estimated $450 to a family of four's annual spending.

While the hike won't be too noticeable on small purchases, there will be large differences for big-ticket items such as cars, living-room sets and diamond engagement rings.

For example, someone buying a $1 soft drink at a convenience store would pay $1.04 this week and probably $1.05 next week as the tax is rounded up.

The general excise tax on a 2006 Jaguar XJ8 LWB selling for $64,995 in Honolulu would be about $2,708 today. A week from now the tax will be about $3,063, or a difference of almost $355.

Some businesses are using the tax increase as a sales point. BMW of Honolulu ran an advertisement promoting its year-end sales event for remaining 2006 inventory noting that it was a good time to purchase. "It doesn't hurt to beat the Jan. 1 tax surcharge," the ad read.

Yet the potential tax savings doesn't appear to be enough to send folks running into stores. Tom Wheeler, owner of Opal Fields Fine Jewelry, said he's been mentioning the tax increase to encourage some people to make purchases now.

"It's closing some deals that normally wouldn't close," Wheeler said. But generally, consumers are "very blase about it."

At La-Z-Boy Furniture Galleries, people generally aren't mentioning the tax as they shop, even though they're aware of the tax hike when sales people mention it, said Kay Kamae-Kaopuiki, La-Z-Boy division manager.

At Servco Automotive, it's difficult to tell what effect the pending tax increase is having on transactions, especially since its Toyota dealerships are having a sale right now, said Rick Ching, executive vice president.

He said customers are aware of the increase, but the number of those who are inquiring about how it will affect the price are few. Moreover, the level of the increase may not be a deal buster for some people wanting to wait.

"It's a $109 increase on a $20,000 car," Ching said. "So it's relatively small in respect to the transaction."

How taxpayers will react remains unknown. But Opal Fields' Wheeler said that customers are generally in agreement on one thing.

"Obviously, no one is happy about it," he said.

Reach Greg Wiles at gwiles@honoluluadvertiser.com.

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