State and county legislative leaders have lined up against a proposal by the state Senate to raise the state excise tax by one percent to pay for mass transit and other needs of government. Mayor Bryan Baptiste said the proposal
State and county legislative leaders have lined up against a proposal by the state Senate to raise the state excise tax by one percent to pay for mass transit and other needs of government.
Mayor Bryan Baptiste said the proposal to raise the sales tax from 4 to 5 percent should be shot down because, if approved, it would pose an additional financial tax burden on Kauaians.
Island residents are already reeling from higher property tax bills, according to Kaua‘i Sen. Gary Hooser, D-Kaua‘i-Ni‘ihau. The higher bills are the result of higher assessments, repeat home sales and more home construction.
Hooser, House Rep. Hermina Morita, D-North Kaua‘i and Gary Heu, Baptiste’s administrative assistant, voiced support for earlier legislative bills that could give counties, and not the state, the power to increase the sales tax for transit improvements if the government entities so desire.
One recent proposal called for tacking a .05 percent surcharge onto the general excise tax.
The new bill, if signed into law, could generate between $300,000 to $428 million in a year
According to county officials, $150 million would go to the City and County of Honolulu, $25 million to Hawai‘i County, $25 million to Maui County and $10 million to Kaua‘i County for transit needs.
Kaua‘i County boasts the smallest population of all the counties, with about 56,000 to 58,000 residents. But it was not known why Kaua‘i County would be allotted the smallest amount.
Another $60 million that could be collected would go into the state’s General Fund. Another $30 million or so would be used to raise the standard income tax deduction.
If the one percent tax increase is approved, a married couple would see their standard tax deduction climb from $1,900 to $5,000.
Hooser said the measure would primarily boost efforts by the City and County of Honolulu to build a rail system on O‘ahu.
“If the primary purpose is mass transit for the City and County of Honolulu, then that is where the money should be raised,” Hooser said.
Hooser voiced preference for previous measures that would give counties the exclusive right to implement tax increases for transit improvements, if county leaders chose to do so.
“I am not supporting that concept of one percent,” Hooser said.
Hooser said the bill will very likely go through revisions, and that “I will have to wait until the end to see what the final product is before I decide how I am going (to vote).”
Morita said the matter boils down to “a home rule issue.
“I prefer the approach where the Legislature would authorize the county to act and the counties would make the decision,” Morita said.
She said the City and County of Honolulu stands to gain the most — $150 million — by the approval of the one percent increase.
“People have to understand that the whole discussion from the beginning was to raise the general excise tax for a specific purpose, and that was to deal with generating money for O‘ahu, delivering a mass transportation system,” Morita said.
Baptiste said the latest Senate proposal “is not in the best interest of the people of Kaua‘i.”
“Our taxpayers cannot afford any more tax burden,” Baptiste said in a news release. He said the bill takes power away from local governments.
“When the authority to levy taxes was in the hands of the counties, it was up to the mayors to make their individual decisions that would be in the best interest of their constituencies,” he said.
“Now that it’s mandated by the state, I find myself against the bill because of the burden it lays on taxpayers and the fact that $60 million would go to the state’s general fund.”
Baptiste said it also didn’t seem fair that the county’s monies “would have to be used for transportation projects while the state would use it ($60 million) for any purpose.”
Heu echoed that sentiment, and voiced preference for previous Senate measures that empowered the four counties, if they chose to do so, to implement a tax increase.
And should the one percent increase measure go through, Kaua‘i County would be locked into paying for transit improvements, as established in the bill’s language, Heu said.
If he had his way, the funds should be used to resolve some of Kaua‘i’s most pressing issues, including long-standing traffic congestion, Heu said.
State Rep. Bertha C. Kawakami, D-West Kaua’i-Ni‘ihau and state Rep. Ezra Kanoho, D-Lihu‘e-Koloa., were not immediately available for comment.
State legislators say portions of the money collected from the one percent sales tax increase — up to $428 million in a year – could be used for mass transit purposes.
From his point of view, Lowell Kalapa of the Tax Foundation of Hawaii, said it appears the state plans to set aside only $210 million to pay for transit improvements .
If the state intends to collect up to $428 million in a year and only $210 million is used, “where would the balance of the money go?” Kalapa asked.
“Citizens are not going to approve tax increases if they don’t know what they are going to be used for,” Kalapa said.
State finance officials said the state collected $1.6 billion in general excise tax revenues as of December, 2003, and $1.8 billion as of December, 2004.
For the same period in 2003, the state collected $50 million in from Kaua‘i, and $55.3 million by December of 2004.
The jump between the two years suggests the island’s economy is doing well.
If the one percent increase goes into effect, the same $55.3 million collected as of December, 2004, would increase to $68.3 million.
Portions of the excise tax revenues are returned to the counties through the state’s transit accommodation tax and fuel tax revenues.
For fiscal year 2004, state officials reported Kaua‘i County was to receive $11.6 million in TAT taxes from nearly $18 million hotels and other tourism-related businesses paid to the state.
