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The Honolulu Advertiser
Posted on: Thursday, January 7, 2010

Tax diversion won't erase revenue woes

When a household runs short of cash, family members quickly start deciding which expenses are core needs and which can be dropped from the budget.

If that doesn't do the trick, the next step is to get more money coming in.

After a year of recessionary budget-cutting much of which can be described as surgery with a cleaver rather than a scalpel state policymakers are at Step 2, but they are going about this revenue-raising business a little clumsily.

They're considering taking it from the counties' share of the hotel room tax.

It's a solution that doesn't address the central problem: The state needs to find resources without simply pushing the problem onto the next rung of government. Counties need the revenue from the transient accommodations tax to cover some of the upkeep costs of parks, roads and sewers that tourists use along with Isle residents.

Some lawmakers met yesterday with county mayors and got some predictable pushback. Big Island Mayor Billy Kenoi said that Hawai'i County already faces a $44 million shortfall, and the loss of TAT would widen the gap by $17 million.

The counties will have to get their taxpayers to top off the budgetary tanks.

Lawmakers yesterday seemed open to giving counties new taxation powers, and that's a good thing. Ultimately the counties might be better off without having to come with hat in hand to the Legislature for a share of a state tax.

But meanwhile, diverting the TAT money now at such a critical time will create more problems than it solves. The state needs to find new revenue streams of its own, such as brokering deals with the private sector to pitch in with some costs or eliminating tax incentives that are no longer critical. And elected leaders may have to bite the bullet and find new revenue from taxes and fees.

Creative solutions are needed for the state's desperate problems. Robbing Peter to pay Paul doesn't qualify.