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The Honolulu Advertiser
Posted on: Sunday, January 28, 2007

COMMENTARY
GOP focus on easing tax burden

By Rep. Lynn Finnegan

High cholesterol is a silent killer. Genetics and personal choices will determine if and to what extent you will be affected. While some factors cannot be controlled, such as inherited genes, the degree of damage that they will exert on your system is significantly increased with the wrong diet and lack of exercise. High blood pressure, chest pain, headaches, difficulty walking because of leg pains are all symptoms of impending disaster that could be averted with changes in lifestyle and appropriate interventions.

What does this have to do with public policy?

On the opening day of the legislative session, the House Republican Caucus wanted to focus on four main issues: innovative education, housing (transitional, affordable, and homeless), renewable energy, and tax relief. Upon learning that the majority in both the House and the Senate really had no intention of extending real tax relief to the citizens of Hawai'i, we wanted to make sure that we speak up against this silent killer. We agree that taxes are a necessity in order for government to operate; however, we need to balance this with the real struggle of our residents and their families.

The tax level is increasing from all veins, from property taxes to the general excise tax. We need to recognize the symptoms of this slow death. There are ongoing struggles with Hawai'i's homeless plight. There are increased headaches from rising household budgets because of tax increases. We buy the same things, but it is just costing us more.

We want to provide meaningful tax relief this session in order to increase people's chances of surviving the cost of paradise. This session, we are introducing bills related to increasing the standard deduction to 75 percent of the federal level, authorizing the constitutionally mandated tax refund, and eliminating taxes on certain food items.

Our tax system here is regressive — hurting lower income individuals the hardest. We have this huge surplus right now because we over-tax people. People recognized this when they voted for this constitutionally mandated rebate as a check against government spending.

We also need to get serious about eliminating taxes on food, and we are introducing HB560 to do just that. If not on all food, which would help ease your financial burden substantially, then at least on essential food items. With our recent increase in the general excise tax, which took effect on Jan. 1, people are now paying 12.5 percent more in taxes when they visit their local grocery stores. The United States Department of Agriculture estimates that in the second half of 2006, a family of four in Hawai'i spent an average of $786 a month on groceries.

Using this number and applying the 4.712 percent effective general excise tax rate, this adds up to at least $432 per family per year for food alone. This is frightening, considering many people in Hawai'i are living paycheck to paycheck.

By eliminating the GET on the 11 food groups the Department of Agriculture deemed essential for pregnant or lactating women to sustain nutrients, taxpayers will save $40 million annually. These foods are eggs, cheese, cereal, milk, juices, canned fish (sardines, tuna and salmon), peas, beans, and lentils, infant formula, infant cereal, peanut butter and carrots.

According to the Tax Foundation, Hawai'i has the third largest state/local tax burden in the country. That burden is 11.5 percent of a person's income and the average taxpayer pays $4,161 per-capita in state and local taxes. Last session, we were successful in raising the standard deduction to 40 percent of the federal level. We cannot stop there. We want it at 75 percent of the federal level, or $7,500 for joint taxpayers and $3,750 for individuals.

We need to remember that inflation occurs every year and that this needs to be reflected in the numbers. In addition to getting the standard deduction raised, we are introducing HB562, which is reflective of real living costs and takes into consideration that inflation occurs annually. We need these numbers applied to the areas of the standard deduction, personal exemptions, and tax brackets.

By raising the standard deduction to at least 75 percent of the federal level, taxpayers will save $30 million a year. Coupled with the savings on the essential foods, we could put $70 million back in the pockets of Hawai'i's people.

Another bill aimed at eliminating the GET from basic needs is HB559, which would exempt landlords from having to pay the general excise tax on residential rents collected from their tenants. This could drive down the cost of rental units and save renters a considerable amount of money each year. Rental costs in Hawai'i are soaring; most times just renting a studio will cost you $1,000 per month. How are people expected to pay for other basic costs when so much of their income is going toward housing costs?

Cutting costs at the pump was a big issue last session. We are introducing a bill that encourages the manufacturers of the alcohol fuels to do the right thing and pass the benefits onto consumers. HB546 exempts alcohol fuels from the general excise tax.

In our package, there is an opportunity for a more affordable Hawai'i. The people of Hawai'i expect us to provide them with some much-needed tax relief this session. O'ahu's 4.5 percent GET rate has been compared as equivalent to other states' sales tax of over 11 percent. The Republicans want to monitor our high tax levels and ensure that it does not continue to build and become a permanent, more serious problem.

Let's give it a good assessment, pull back from our old habits and start new ones.