The state House and Senate, working to close a significant budget deficit, voted today to raise income taxes on higher-income residents and hotel-room taxes to help balance the budget.

Both chambers also voted to raise taxes on cigarettes and other tobacco products. They sent a bill that would have placed new limits on the Act 221 high-technology tax credits back to conference committee for further negotiations.

Gov. Linda Lingle has said she would veto any income tax or hotel-room tax increases but would likely agree to the hikes on cigarettes and other tobacco products.

The tax measures are part of the combination of revenue-generating ideas and spending cuts lawmakers are using to balance the two-year budget. Negotiations over the budget continue this evening. Lingle, meanwhile, is in collective bargaining with public-sector labor unions on potential furloughs and changes to health benefits.

State Senate Majority Leader Gary Hooser, D-7th (Kauai, Niihau), said while lawmakers would prefer not to raise taxes, they need additional revenue to balance the budget.

State Senate Minority Leader Fred Hemmings, R-25th (Kailua, Waimanalo, Hawaii Kai), warned that tax increases would further damage the state's economy. He said majority Democrats were leaving the state's public workers largely unscathed.

Under the bills passed today, state income taxes would rise on individuals who earn $150,000 or more a year, heads of households who make $225,000 or more a year, and couples filing jointly who earn $300,000 or more a year. Lawmakers also would raise the standard deduction, which would provide a break for taxpayers who do not itemize on their tax returns.

The higher income taxes would provide the state with about $48 million in additional revenue each year. The tax increase would expire in 2015.

The hotel-room tax — known as the transient accommodations tax — would rise by 1 percentage point in July and an additional 1 percentage point in July 2010. The higher rate would remain through 2015. The higher hotel-room taxes, which would bring the rate from 7.25 percent to 9.25 percent, would generate about $30 million extra for the state in the first year and then $60 million in the second and following years.

The tax is applied to operators of hotel rooms, apartments, condominiums, beach houses and other places rented to visitors. The assumption is operators will pass the tax increase on to their guests.

State and private tourism industry officials have warned that the higher taxes would be counterproductive given the state's slumping visitor numbers.

The state's 10-cent tax per cigarette would rise by 2 cents starting in July, with the money from the increase going into the state's general fund. Previously scheduled one-cent increases to the cigarette tax will also go forward over the next few years, but that money will continue to be split between health and tobacco prevention programs.

The tax rate on other tobacco products, such as pipe and chewing tobacco, would jump from 40 percent of the wholesale price to 70 percent of the wholesale price. Lawmakers voted to raise the rate on premium, hand-rolled cigars from 40 percent to 50 percent of the wholesale price. Thinner cigars that resemble cigarettes would be taxed at the same rate as cigarettes.

Lawmakers voted to withhold 5 percent of conveyance tax revenues to the rental housing trust fund and the natural area reserve fund, with the money shifted to the general fund.