Here's my suggestion for Act 1 of the 2007 Legislature: Restore faith with harassed Honolulu taxpayers by giving back the 10 percent lawmakers skimmed off the top of the new tax for O'ahu mass transit.

The half-cent increase in the general excise tax on O'ahu, which went into effect Jan. 1, is expected to raise $150 million a year to pay for a transit line from Kapolei to Honolulu, which would put the state's cut at $15 million a year — or $300 million over the 20-year life of the tax.

Legislators claimed the money was needed to cover state expenses in collecting the tax for the city, but actual state expenses won't be even a third of the amount the Legislature siphoned off, according to state Tax Director Kurt Kawafuchi.

In any case, the Legislature didn't designate any of the state's share to go to the Department of Taxation, leaving it all in the general fund, where it will be available as slush money to pay for pet projects of lawmakers and the special interests who elect them.

It's simply unconscionable for legislators sitting on a $700 million budget surplus to needlessly add 10 percent to the cost of an O'ahu transit system, which will be the most expensive public works project in Hawai'i history at a minimum cost of $3.6 billion.

O'ahu taxpayers already are facing a triple-whammy of the new transit tax, a 15-percent increase in property tax valuations and a renewed excise tax on gasoline that increases the cost by more than a dime a gallon.

Eliminating the state's transit vigorish could either reduce the burden on taxpayers by 10 percent or help pay for vital spurs to Honolulu International Airport, Waikiki and the University of Hawai'i that the city is thinking of cutting out to reduce costs.

In response to my inquiry, Kawafuchi said it will cost the state $4.5 million in fiscal year 2007 to set up a system to collect the transit tax for the city — less than a third of the state's expected first-year share of the transit tax.

Kawafuchi said the state's expenses include reprogramming computers, designing new forms, public education and hiring additional staff to answer the questions of confused taxpayers.

The tax department won't speculate on what its collection costs will be in 2008 and beyond, but it stands to reason they would go down substantially given that the computer work and new forms were one-time startup expenses and confusion should subside as time goes on.

Since the Legislature provided the tax department no funds to pay for collecting the excise tax for the city, the Lingle administration refused to begin collections until the city put up a $5 million guarantee to cover expenses. Kawafuchi will ask the Legislature for an emergency appropriation this session to cover the $4.5 million from excise tax revenues before the city has to actually pay the money.

That would be an excellent time for the Legislature to repeal the 10 percent state surcharge and either have the tax department bill the city for actual collection costs or absorb the costs as the state's contribution to a transit system that would serve many state facilities.

Gov. Linda Lingle, who claims to champion taxpayer interests, hasn't made a big issue of this legislative banditry.

Honolulu Mayor Mufi Hannemann and the City Council meekly accepted the Legislature cutting itself a windfall as the cost of getting state authorization for the transit tax — kind of like paying a toll to the mob to open a pizza parlor in Providence.

It's time they all show some political character and take a stand for taxpayers to get this money back.

Reach David Shapiro at dave@volcanicash.net.