Go with Senate rail tax measure

The House and Senate conference committee hashing out ways to raise construction funds for Oahu’s rail-transit project have a clearly superior option before them. When conferees reconvene on Monday, they should move swiftly to adopt the Senate’s proposal, which would extend Oahu’s half-percent general excise tax surcharge for five years.

This straightforward approach solves the immediate budgetary woes without permanently raising taxes. The House proposal, by contrast, provides too little for too long, proposing to reduce the surcharge to a quarter-percent but extend it for 25 years.

The statewide GET, which stands at 4 percent without the half-percent rail surcharge on Oahu-based sales, is a regressive tax that compounds costs for consumers at every step of a business transaction. Still, the surcharge remains the best tax to help fund rail construction because all Oahu consumers pay it, residents and visitors alike.

Tapping into the county’s other main source of revenue, from real property taxes, would impair funding for numerous vital programs and services. Moreover, it would impose too large a rail-financing burden on a narrow group of taxpayers, namely property owners. Ultimately, the train will directly benefit anyone who wants to ride it — a class not limited to property owners.

It is important to emphasize these facts because House Finance Committee Chairwoman Sylvia Luke keeps insisting that the City and County of Honolulu put "more skin in the game" when it comes to rail financing.

If Luke is referring to the political fallout of raising taxes, not to worry: Honolulu’s mayor and City Council will be on the hook for this massive project, which despite ballooning beyond original budget projections remains necessary as one transportation solution on a crowded island that needs many.

If Luke is talking about Oahu taxpayers, then her comments are way off the mark. No one has more skin in this game than people buying goods and services on Oahu. They are the ones paying the GET surcharge, from which the state collects an unconscionable 10 percent skim in exchange for administering the surcharge.

The skim alone is expected to total hundreds of millions of dollars over even the original lifespan of the surcharge, money that flows not to rail construction — as it should — but to all manner of government programs throughout the state, including on the neighbor islands.

The state should keep only what it costs to administer the fee, so more money can flow toward rail construction. Accomplishing even that would significantly reduce the project’s budget woes.

Oahu’s GET surcharge was first imposed in 2007, and was supposed to expire in 2022. The Senate plan that would extend it to 2027 should provide enough funding for the Honolulu Authority for Rapid Transportation to proceed uninterrupted with building the original 20-mile elevated-rail system, with 21 stops from East Kapolei to Ala Moana.

Approving this limited tax increase is as far as Hawaii lawmakers should go this session. Discussions over how to subsidize operations once the train is up and running, or building out farther to the University of Hawaii-Manoa and to West Kapolei, must wait until this struggling enterprise is further on down the line.