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Hawaii U.S. House candidates' tax plans will increase the deficit

By Associated Press

LAST UPDATED: 10:27 p.m. HST, Oct 21, 2010

Both Charles Djou and Colleen Hanabusa say one way to spur the economy is to avoid raising personal income taxes.

The difference between the two major candidates for Hawaii's 1st Congressional District seat is just whose taxes will stay the same and whose will get hiked.

Djou, the incumbent Republican who won a May special election, insists that everyone's tax rates should remain as they have since then-President George W. Bush pushed through cuts in 2001 and 2003 from levels set during the Clinton administration.

Hanabusa, the Democratic state Senate president who finished second in May, just as strongly favors retaining current rates for everyone except the wealthiest top 2 percent of Americans.

But either plan will inflate the nation's long-term debt. And while both candidates contend the federal budget deficit is also a serious problem, neither will specify what spending -- particularly those dollars that benefit Hawaii -- should be reduced or eliminated.

Djou's economic views can be summed up in a few words: Taxpayers pay too much and the federal government spends too much.

"The American people understand we are spending too much money, and we are spending money to no end for very poor results," the congressman said in a recent interview. "And the federal government has got to get smaller."

Retaining current tax rates would give investors, particularly small business owners, certainty about the taxes they will pay and will spur them to spend, Djou said. Allowing rates to rise on the wealthy would slow economic growth and do very little to reduce the budget deficit, he asserted.

However, there has been certainty for years that the rates would go up. The GOP-led Congress at the time, while approving the Bush tax cuts, set January 2011 as the expiration date.

Republicans now argue those rates should be made permanent for everyone, which would add $3.9 trillion to the national debt over the next decade, according to Congress' Joint Committee on Taxation.

President Barack Obama and other Democrats contend the rates should remain static for everyone except those whose annual income exceeds $200,000 for individuals and $250,000 for married couples. Their plan would add about $3 trillion to the debt, according to the joint committee.

If no deal is struck in what is expected to be a lame-duck congressional session after the Nov. 2 elections, the rates for everyone will revert to pre-Bush levels on Jan. 1.

As for spending, Djou would shrink nonmilitary discretionary spending -- only about 16 percent of the total federal budget -- to 2008 levels. That would include a halt to federal economic stimulus spending.

However, Djou concedes that most of the stimulus money has already been spent -- 88 percent as of Sept. 17, according to the U.S. Recovery Accountability and Transparency Board.

And the congressman himself has been eager to trumpet some stimulus spending, such as in August when he and other elected officials highlighted a $24.5 million reconstruction project on Honolulu's Pier 29.

"As long as the Congress continues to have this underhanded, under-the-table budgeting process that is expert in wasting money, of course, I want to make sure as much of it is wasted in Hawaii as possible," he said.

On the other hand, Hanabusa praises the stimulus program -- as have most of Hawaii's major elected officials, including Republican Gov. Linda Lingle.

Hanabusa contended the budget deficit will decline from the combined impacts of stimulus spending -- particularly construction projects -- the eventual drawdown of U.S. troops in Iraq and Afghanistan, and next year's scheduled rise in tax rates for the nation's wealthiest.

"We have to set our priorities" when considering whether to extend the Bush tax cuts, she said, based on who would best benefit. "And I believe that it best benefits those that we consider to be the middle class."

But Hanabusa concedes that economic growth in the near term is unlikely to simulate the years preceding the 2008 Wall Street collapse and the burst of the housing bubble.

Some government spending also will need to be cut, Hanabusa added. But she is loathe to accept any cuts for Hawaii, which received almost $2,000 in per capita federal funding last year, the 16th highest among states, according to Census Bureau figures.

"Hawaii, being where it's located, needs to have the benefit of federal funding," she said. "So I'm not sure that I'm willing to give up much."

Neither Hanabusa nor Djou want to talk about cutting Medicare, Medicaid and Social Security, popular programs that comprise 40 percent of nondiscretionary spending.

Some Republicans on the mainland -- U.S. Senate candidate Marco Rubio of Florida, for example -- have suggested raising the Social Security eligibility age.

But Djou and Hanabusa say they prefer waiting for Obama's deficit reduction commission to unveil its recommendations. The panel is scheduled to do so in December -- after the election.

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