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The Honolulu Advertiser
Posted on: Tuesday, April 20, 2010

Budget bill dilemmas force hard decisions

By Rep. Marcus Oshiro

This week, the House and Senate enter the homestretch of the 2010 legislative session, and the passage of the state budget bill is the central pole to which many other measures are tethered. When news breaks on the passage of the budget, headlines will focus on many of the hard decisions we will have had to make to resolve a $1.2 billion deficit. No one will walk away unscathed, but I advocate for the House position at this point in the session because I believe it is balanced and serves the public best.

The House has passed a budget bill and accompanying revenue bills that are responsible and anti-special interest. These bills are intended to balance the need to fund services essential for public health, welfare, and education yet minimize the impact on the general public and economic recovery.

In the budget bill, the House has restored positions and funding for child protective services, adult protective services, agricultural inspectors, and food sanitation inspectors.

The House also has committed to provide additional funds to the Department of Education should the teachers union, Board of Education and governor reach an agreement to end furlough Fridays.

The major revenue bill passed by the House would temporarily suspend certain general excise tax exemptions, but it would tax those activities at 0.5 percent, not the full 4 percent. I must emphasize that the House did not suspend the exemptions for nonprofit organizations, condominiums, hospitals, religious groups, prescription drugs and prosthetic devices.

Another major revenue bill would delay the high technology tax credits claimable by taxpayers who have made high technology "investments." In general, these taxpayers are those with higher incomes who should be able to weather the impact of a reasonable delay.

The House did not pass an increase of the general excise tax. We rejected any increase because the GET is a regressive tax, meaning the tax payments comprise a higher percentage of poorer people's incomes than it does for wealthier people. It also increases the cost of doing business in Hawai'i, making goods and services more expensive or forcing businesses to absorb the tax, resulting in less available income to pay employees, make investments, or clear as profit.

In addition, the House did not increase income tax rates, nor take the transient accommodations tax from the counties because that may result in raising the real property tax for commercial and residential property owners and Neighbor Islanders would bear the brunt of this decision.

Proponents argue wrongly that the GET should be increased so that the revenues may be used to pay government employees, which would be good for the economy. An increase of the GET would not increase the dollars circulating in the Hawai'i economy. Rather, an increase would shift the dollars from the private sector to the public sector and negatively affect both consumers and workers.

Proponents also argue that a portion of the GET is paid by, or exported to, visitors. Increasing the tax, however, would likely leave visitors with less to spend on goods and services provided by Hawai'i businesses. It cannot be assumed that visitors will spend more, especially during these difficult times.

In contrast to the House position, certain senators have advocated a 25 percent GET increase upon the entire community. These senators would rather protect the special interests that benefit from tax exemptions and tax credits. They argue that maintaining the exemptions for special interests would protect vulnerable businesses.

What about the great majority of businesses that are not special interests and do not benefit from exemptions? Are they not also vulnerable in this dismal economy? Those businesses would have to pay more taxes under the senators' proposal, while the special interests currently exempt would continue to escape any burden.

Finally, the idea is ludicrous that the House has initiated "kicking the can" down the road by delaying tax refunds, Medicaid payments and other bills. That is the proposal of the governor. The House has opposed the concept because future taxpayers will bear the costs.

Frankly, however, the House may have no choice but to accede to some of the delayed payments because of the governor's refusal to recognize that some revenue increases are necessary for the public good.

Government's purpose is to protect and serve the needs of the people. The House has taken the economic and budgetary problems of the state very seriously and considered a variety of measures to resolve the problem with the needs of the public as our first priority. We made difficult choices that are necessary, and while unpopular with the special interests, it is the responsible thing to do.