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The Honolulu Advertiser
Posted on: Wednesday, February 24, 2010

Panel caps room-tax share

By Derrick DePledge
Advertiser Government Writer

In a potential break for counties, the state House Finance Committee last night agreed to cap the amount of hotel room tax revenue that goes to counties rather than scoop all of the revenue to help close the state's budget deficit.

The cap would be set at the current $94.3 million a year for the next five years, with the state keeping any hotel room tax revenue that comes in over that amount.

Gov. Linda Lingle and state House and Senate leaders had proposed temporarily taking all of the hotel room tax revenue from counties, which county mayors strongly opposed, claiming it would likely lead to higher property taxes to make up the difference.

"We found other sources of revenue," said state Rep. Marcus Oshiro, D-39th (Wahiawā), the chairman of the House Finance Committee.

The bill advanced by the committee last night still must go through the full House and cross over to the state Senate, but it puts the House on a path to potentially spare counties a financial hit at a time when counties are also facing budget shortfalls.

Neighbor Island lawmakers, in particular, had fought against scooping all of the hotel-room tax revenue, arguing it was passing the state's budget pain on to counties.

"They basically can plan now that they will be getting the same amount they got in recent years," said state Rep. Gil Keith-Agaran, D-9th (Wailuku, Pu'unēnē, Makawao).

The House Finance Committee, in order to make up for the revenue the state would not be taking from counties, agreed to repeal general excise tax and use tax exemptions on a range of businesses and activities.

But instead of taxing the businesses and activities at the 4 percent GET rate, lawmakers would impose a 1 percent GET tax. Lawmakers expect to generate about $100 million a year from the idea.

Lawmakers on the committee agreed to preserve the GET exemption for nonprofits, however.

The committee also opted to defer potential state income tax increases and a GET hike, reducing the chances such tax increases will move this session.