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Monday, September 15, 2014         

ON POLITICS


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After they raise our taxes, legislators will be seeking cover

By Richard Borreca

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Even with elections more than a year and a half away, this is a perilous week for local state politicians.

Paying for Hawaii’s state government is becoming increasingly difficult. Like 2009 and 2010, 2011 was another year with a projected two-year state deficit of more than $1 billion.

The reason why the deficit remains is that the solutions proposed in 2009 and 2010 were not enough.

Estimates of how much money would be raised were too optimistic, how much the state would save were also off.

Real time, real accounting is difficult and, as Rep. Marcus Oshiro, the House Finance Committee chairman warned early on, “We have taken all the low-hanging fruit.”

Hotel taxes have been raised already. The state delayed paying tax refunds in order to save money, and all the bonds that were available have been refinanced.

Oshiro and his former Senate budget colleague, Sen. Donna Mercado Kim, had started to squeeze the state special funds.

Now this year, with Sen. David Ige (D, Aiea-Pearl City) running Ways and Means, there is little left to cut.

The solution then is to raise taxes.

An astounding $600 million in tax increases will be voted on this week.

The Legislature is moving to cancel a series of tax exemptions that have favored building contractors and Hawaiian and Continental airlines. Residents with higher incomes will find they have fewer state tax deductions and limited state tax breaks.

Even that is not likely to please everyone. Gov. Neil Abercrombie, for instance, had wanted $120 million in taxes to come from local pensioners, but the Senate refused to go along.

Abercrombie, who reportedly has been meeting almost daily with House Democratic leaders, including Speaker of the House Rep. Calvin Say, has not publically commented on the huge tax increases offered up by the Legislature.

The governor’s mission is more complicated because he has had to rush through emergency legislation to borrow from the state Hurricane Relief Fund and the Rainy Day Fund just to balance this year’s budget, the one that ends on June 30.

The hurricane fund is a trust fund, so the money, $43 million of it, must be repaid. That means that next year’s budget starts out owing the state $43 million.

Abercrombie’s proposed tax increases on tobacco, alcohol and sugary soft drinks all failed last Friday.

According to members of the Senate, the budget will still balance, but there is much concern that the looming Council on Revenues meeting will spin the state budget even lower.

What does that mean?

It is likely that the budget, already just barely in the black and looking at a $43 million hurricane fund debt, will not balance.

And that means more taxes next year.

Whether Abercrombie and Lt. Gov. Brian Schatz can help shield the incumbents running for re-election from the voters’ wrath is not known.

Democrats may not want leadership as much as they just want cover.

————

Richard Borreca writes on politics on Sundays, Tuesdays and Fridays. Reach him at rborreca@staradvertiser.com.






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