LIHUE — The Kauai County Council will soon have to decide whether it wants to raise taxes.
Gov. David Ige announced on Monday he will not veto legislation that gives the Neighbor Islands the option of levying a tax surcharge on the state’s General Excise Tax (G.E.T.) in order to raise money for transportation.
Oahu is the only island that already levies the surcharge, which adds 0.5 percent on top of the state’s 4-percent G.E.T. in order to raise funds for that island’s rail project. When it becomes law, House Bill 134 will extend the ability to raise revenue through that funding mechanism to Kauai County, which could generate an additional $8 million in tax revenue for the county a year.
The G.E.T. is a business tax charged at every level of transaction on goods and services and is usually passed on to consumers.
Although too early to say for certain that the proposal will pass, there is already tentative support among a majority of members of the Kauai County Council.
Kauai County must act by July 1, 2016, if it wants to levy the tax that would expire at the end of 2027.
“The fact that the county has an option is a good thing,” Council Chair Mel Rapozo said. “If the funds will be used for infrastructure, I would be leaning toward supporting that.”
Likewise, Council Vice-Chair Ross Kagawa voiced support for the plan, noting it could help make up for revenue lost when the state capped the Transient Accommodation Tax.
“I’d rather collect the half-percent General Excise Tax from everybody, including visitors, than raising more property taxes,” Kagawa said, noting that the G.E.T. is, “the perfect way to let everyone pay for the services they use.”
Finance Chair Arryl Kaneshiro, who said he wants to see the money go toward road infrastructure, echoed that point.
“It enables us to collect tax from visitors who also use the roads,” he said.
Councilwoman JoAnn Yukimura is a advocate of expanding the G.E.T and lobbied state lawmakers to give counties that option. But Yukimura said that if approved, she hopes most of the funds will go to public transit, rather than just being used for roads.
“I think it’s imperative to expand our transit system if we want to solve our traffic congestion,” Yukimura said. “Our traffic problem is not going to be solved by just building and expanding roads.”
Yukimura also expressed concern that the tax increase could hurt people with lower incomes, which is why she advocates using it for public transportation rather than just road infrastructure.
“It’s a regressive tax,” Yukimura said. “If you spend it on transit, you are going to be supporting the families that are hit the hardest by this tax.”
Officials from Mayor Bernard Carvalho Jr.’s administration said he supports adding the 0.5-percent tax surcharge as a way of raising funds for transportation for the island. The council would have to hold public hearings before approving a tax surcharge.
All of Kauai’s legislative delegation voted in favor of giving counties the surcharge, but that doesn’t necessarily translate to support for raising the tax.
State Rep. Dee Morikawa said she voted in favor of the bill because Oahu needs it to complete the rail project, but that she doesn’t support adding the surcharge on Kauai.
“Kauai people are being taxed enough already with taxes and fees,” Morikawa said, although she added that she might support the G.E.T surcharge if the County Council offsets it by lowering other taxes, such as reducing vehicle weight tax and registration fees.
State Rep. Jimmy Tokioka said it is up to the mayor and County Council to decide if the surcharge is appropriate for Kauai.
“I voted in favor of the (tax) to support the continuation of the rail project on Oahu — it was clear they needed the extension to finish the rail project,” Tokioka said.
He declined to tell Kauai’s leaders what to do, but, “At least they have the option.”
w Ige also said he plans to veto a bill that would ban sex trafficking, making the state the only one in the nation without a comprehensive law on the subject.