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The Honolulu Advertiser
Posted on: Wednesday, January 27, 2010

Lingle heading out on a gamble

By Jerry Burris

Considering Gov. Linda Lingle's last full year in office, a surfing analogy might not be inappropriate.

Lingle sits, so to speak, on the edge of a large, dark and rather frightening wave. Her choice is to go back, into deeper waters, and hope to ride out the storm. Or, she can take off, ride the wave and hope for the best.

Clearly, she has taken that second option. In her final State of the State Address on Monday, Lingle made it clear she intends to go out fighting and take risks that someone concerned about re-election might sensibly avoid.

Over the years, Lingle has come to fully identify with the GOP credo that raising taxes, no matter how strong the need, does little good. She has been staunch in opposing most if not all tax-increase proposals.

In her speech this week, Lingle once again proposed no new taxes. That sets her in direct opposition to many Democrats in the Legislature, who see a modest increase in taxes a very appealing alternative to cutting services.

But "taxes" come in many forms. The most direct is to raise excise or income taxes on residents (and visitors). Less direct is to reduce the tax burden on local residents and businesses in hopes the economy will respond positively. But if it doesn't, someone will feel the consequence.

Lingle's plan is a gamble, of course, because taking off on a wave bigger than you are accustomed to could result in a wipeout.

In a time of record budget shortfalls, Lingle proposes cutting the amount of money the state collects in hopes it will jump-start the economy. She proposes:

• Taking 5 percent of any general fund balance at the end of any budget year and putting it into a newly reformatted rainy-day fund. That's a tax hike for anyone who believes they should pay only as much as is needed to maintain government operations.

• Offer a tax credit to businesses that hire the unemployed. By definition, this means some businesses in a hiring mode will pay fewer taxes than they might have otherwise.

• Give a 10 percent tax credit for construction and renovation for hotels and resorts. The argument is that 90 percent of new spending is better than nothing, but it still represents a loss of revenue for the state.

And this is where the risky takeoff on the steep face of that dark wave comes in. If Lingle is correct, the payoff of her proposals will be felt in the years to come. If she is wrong, the cost of her ideas will be felt in the decline of basic state services and the social safety network that has been built over the past several decades.