Tim Lyons came to Hawaii on a lark in 1974 and by 1976 was selling memberships for the Hawaii Business League. That, says Lyons, was when he "really started to understand" what small business owners have to go through to operate in Hawaii’s tough economic climate.

Lyons now is president of the 900-member HBL, as well as executive director or president of a number of other business groups, on whose behalf he has been lobbying at the Legislature this year to, among other things, defeat the repeal of certain exemptions to the general excise tax.

Through his own company, The Legislative Center, Lyons represents groups such as the Hawaii Flooring Association, the Roofing Contractors Association, the Pacific Insulation Contractors Association and the Subcontractors Association of Hawaii, plus the Hawaii Pest Control Association, the Ocean Tourism Coalition and other business entities.

A graduate in political science from the University of the Pacific in Stockton, Calif., Lyons, 62, says he finds his work "fascinating and interesting and, of course, frustrating."

"But, you know," he added, "I still like it … and as long as I keep liking it, I guess I’ll keep doing it."

Question: So are you one of those “special interests” that House Speaker Calvin Say was talking about earlier this month after the state Senate approved a temporary suspension of several GET exemptions?

Answer: Yeah, that’s me. But, you know, what cracks me up about that is the fact that the Girl Scouts are a special interest. (Laughs) I don’t mean to pick on them, but everybody is a special interest. A church is a special interest. Years ago the churches lobbied for bingo, and they were a special interest, to make bingo legal.

Q: But to the point of Rep. Say’s complaint, what would be your defense?

A: I think when it comes to the GET exemptions, you have to look at them and determine is this a justifiable exemption or not. I mean, just because it’s an exemption, that doesn’t make it guilty. You have to look at it.

Take as a good example the subcontractors. Currently, the way that works is, on a construction job, depending on the complexity of it, you could have one general contractor and as many as 19 different subs — an electrician, a plumber, a drywall guy, a painter, and it goes on and on and on.

… So the way it works, the general contractor pays the 4 percent general excise tax — or 4.5 percent on Oahu — he pays that on the gross, OK? Now what he does is, when he goes to pay, let’s say, the plumbing sub, he subtracts the amount that he has paid for the plumbing portion.

Let’s say there was a $100,000 payment, and $10,000 of it was for the plumber. He pays the 4 percent on the $10,000. Now he deducts that $400 that’s attributable to the $10,000, and he sends the plumber a check for $9,600.

So I would defy anybody to say the subcontractor is exempt from the tax. He’s paying it. It’s just that the general contractor is paying it for him. So it’s a matter of convenience. It’s also a matter of then doing that for every sub down the line.

Q: Would you call the GET unfair?

A: I would call the current situation fair, in as much as the plumber is paying the tax, (since) the general is paying the tax.

What the bill in the Legislature does, it says the general does not deduct the tax. You still have to pay the 4 percent on the $100,000, but now there’s nothing to deduct. So now he sends the plumber the $10,000, and now the plumber has to pay 4 percent on that. So in that case the state is getting the tax twice off of the same money.

Q: If the GET is so unfair that it requires exemptions, what would be a better form of taxation?

A: Well, we’ve talked about that on a number of occasions, as to whether Hawaii should actually have a true sales tax, the same as most other states. To my knowledge, unless it’s changed, there are only about six states that even tax services. All the rest of them tax only goods. And many of them don’t tax food and drugs, whereas we just tax everything.

I’ve heard a number of our legislators say that years ago when they would go to mainland conferences with other legislators, those guys would say, “Wow, you only got a

4 percent tax; how do you guys get away with it being that cheap?” They’re dealing with 7, 8, 9 percent sales taxes, right? So they don’t understand the compounding effect of ours.

Q: Considering the financial condition of the state, what else could the Legislature do?

A: There have been several things that have been suggested.

One is that the policy of creating a special fund every time you turn around is probably bad policy. I mean, it tends to be that whoever’s special fund it is tends to think of it as their money. It takes away flexibility from legislators, particularly in times like this, to be able say, “We shouldn’t be spending that much on this particular project when we’ve got some schools to fund.”

I can’t broadbrush and say that all of them are not worthy. But, you know, the bottle bill fund, as an example, has close to $20 million in it. Now what do they need that for?

So, there are undoubtedly … some programs there, I think, that maybe have outlived their usefulness, or maybe they’re just not the priority now that they were when they were created.

The other one is — Lowell Kalapa (of the Tax Foundation of Hawaii) has said it, and I don’t dispute it — that if you’re going increase anything, it’s the state income tax that ought to be increased, because that has built into it multiple levels of taxation, depending on your income … and it has a number of exemptions built into it, or deductions, for child care or low income and other things — all things the Legislature by policy has deemed to be things important for you to live day to day.

Q: How about spending cuts?

A: Well, I think there’s been sort of a universal thought by businesses that government is overloaded. The hard part is that when you start asking people for specifics, you get many different answers.

Q: There’s also the union pay cuts, right?

A: Yeah, those are in the cuts category. So the pay cuts, the pension tax, the health insurance equalizer, all of those kinds of things should be addressed and looked at. They could all help, but I don’t think there’s any one magic bullet here.

Q: Are you optimistic that the GET exemptions will be saved for you?

A: No (laughs), not at all. Because, when we look at it, I think there was a lot of thought that the Senate would prevail in its attempt to increase the GET. And, of course, that battle’s not over yet, but at least for the time being that bill died in the Ways and Means Committee.

Q: As a lobbyist, are you generally on offense or defense — proposing legislation or trying to defeat it?

A: It’s probably weighted more toward defense. I think that a lot of times business just want to stay clear of the Legislature (laughs). They don’t necessarily go on the offense. They tend to sit around and wait till they’re attacked, and hope that nobody will know they’re there.

Q: Is the level of regulation a problem?

A: The level of regulation is a problem, but … I think it’s tied very definitely to Hawaii’s history. You have an island jurisdiction; every island wants to be in charge of their own affairs as much as they possibly can be. And then you have the state that wants to do its thing, and has to deal with the counties. And then along comes the feds that say we don’t care what you do, we’re going to do it this way. … So you get a lot of overlap.

Q: Is there anything good about doing business in Hawaii?

A: (Laughs) Well, as they say in the Realtor world, location, location, location.

Q: What’s your outlook, for the economy?

A: I think the big problem is we have this retracting of the economy at the same time that legislators are talking about increased revenues from those same people that are suffering in a retracting economy. That’s the tough part. I mean, if there was ever a time not to increase the tax load, this is it, because you want jobs to go up, and they’re only going to go up when you got extra money for that position. If you gotta pay the tax, you’re not gonna hire.