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The Honolulu Advertiser
Posted on: Sunday, March 12, 2006

What's behind that tax squabble

By Jerry Burris
Advertiser Columnist

There's an interesting subtext to that brief squabble between Gov. Linda Lingle and Mayor Mufi Hannemann last week over who is responsible for seeing to it that the city's new transit excise tax is collected efficiently.

No, the subtext is not that Hannemann is now thinking about challenging Lingle, or that Lingle suspects the mayor may have such ideas.

There's no evidence of that.

Rather, it has to do with Lingle's own campaign for re-election, and how she will be measured on the big issues.

The background: Lingle allowed the bill granting the counties a half-percent excise tax to become law, but only reluctantly. At first, she suggested strongly that she would veto the measure, but relented only after conversations with Hannemann and assurances from legislative leadership that any potential kinks would be worked out.

Lingle's big objection was that the measure intended the state to collect the new tax and then pass it on to the counties (or rather, county, since Honolulu is the only one to take advantage of the offer).

This was presented as a matter of cost, efficiency and bureaucratic turf. But in reality, it had to do with a good deal of practical politics.

Republican Lingle is in no mood to go into the campaign tagged as a tax-raising governor. But that's precisely how some will position her, since she did allow one of the biggest tax hikes in recent memory to become law.

But the thesis here was that the state is not raising taxes. It is the counties, and the detail of who does the actual collection is supposed to say a lot about who is the tax-raiser and who is not.

So a deal was struck (announced with much fanfare in the atrium of the state Capitol): the state, the county and legislative leaders would develop a plan so that the county could collect the tax.

But to this point, nothing specific has been worked out. Hannemann and Lingle exchanged tough words over this, each blaming the other for failing to see the deal through.

Cooler heads quickly prevailed, and within a day, Hannemann and state Tax Director Kurt Kawafuchi were saying soothingly that everything will be fine and a "win-win" solution is in the offing.

You know full well, however, that if Lingle has her way, the state's mitts will be a mile away from any role in the collection and distribution of the tax.

The alternative would be politically intolerable. Lingle's opposition would surely (and somewhat unfairly) make the case that Lingle is hardly the anti-tax-hike champion she presented herself as.

Not only did she allow this huge tax hike to become law, they'll say, she is the one collecting it from you. Ouch.

As a practical matter, all of this would be quite easy to resolve. The state could collect the tax and just cut a check to Honolulu for its share. Or the city could just ask businesses to copy them on their excise tax form, with a check for the half-percent attached.

That's practical. But when politics gets involved, nothing is ever easy.

Reach Jerry Burris at jburris@honoluluadvertiser.com.