Mayor right to call out state on skimming city’s rail tax

Honolulu taxpayers should cheer Mayor Kirk Caldwell’s attempt to recover a 10 percent surcharge the state is skimming from the excise tax Oahu residents pay to finance the $5.26 billion rail project.

The Legislature took the kickback in 2006, when it authorized the city to assess a 0.5 percent rail tax on top of the state’s 4 percent general excise tax.

The state’s 10 percent was ostensibly to cover its cost of collecting the tax for the city, but collection costs turned out to be negligible.

Caldwell told lawmakers that the state’s $21.2 million take in 2012 was nearly enough to cover the entire budget of the state Tax Department.

"The GET surcharge was enacted to build the rail system," Caldwell said. "The taxpayers have the right to know that taxes are being spent on the purpose intended — to build a rail system."

The state has pointlessly added an extra 10 percent to the cost of a commuter train that was already the most expensive public works project in Hawaii history.

The kickback goes into the state general fund to pay for programs statewide, meaning a levy paid only by Oahu taxpayers funds services in all counties.

The state’s skim has fed public suspicions that rail hasn’t been run cost-effectively and is being used to siphon tax funds for other uses.

Former Mayor Mufi Hannemann was forced to accept the surcharge as the cost of getting the rail tax, and his successor, Peter Carlisle, meekly promised lawmakers he wouldn’t ask for the money back.

But Caldwell tackled the issue head-on in his first appearance before House and Senate money committees, saying the state has taken $100 million since 2007 and could triple that in the next decade.

The city could sorely use the lost $300 million to cover rail cost overruns or help pay for extensions of the line to Waikiki and the University of Hawaii.

Caldwell, a former legislator, charitably attributed the surcharge to the state’s need to balance the budget during the Great Recession, but that wasn’t how it happened.

When the Legislature enacted the skim in 2006, it was well before the recession, and the state was running a $700 million surplus.

It was simply a money grab at the expense of Oahu taxpayers, and now that the state is coming out of recession and running a surplus again, it’s the right time to make the city whole.

Much resistance to ending the skim comes from neighbor island lawmakers, who understandably enjoy having Oahu taxpayers pay for services in their counties.

You can’t blame them for taking care of their constituents. The question is, When will Oahu legislators take care of their constituents and demand that these tax dollars return to their intended purpose?

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Reach David Shapiro at volcanicash@gmail.com or blog.volcanicash.net.