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The Honolulu Advertiser
Updated at 6:08 p.m., Wednesday, April 22, 2009

Legislature: Budget woes can't be solved by tax hikes

Yes, times are hard.

The state budget is roughly $270 million in the hole, and state lawmakers have the task of making some difficult decisions in order to balance it. That's their job.

But the Legislature opted to take the easy way out yesterday. Rather than working harder for additional spending cuts, looking for greater efficiencies and pushing for greater savings in labor costs, lawmakers instead fell back on a traditional solution: raising your taxes.

House Bill 1747, approved yesterday, raises income taxes for higher-income earners: individuals who earn $150,000 or more per year; heads of households who make $225,000 or more per year; and couples filing jointly who earn $300,000 or more a year. The increases, which would expire in 2015, would affect about 37,000 Hawai'i residents.

Gov. Linda Lingle has long warned that she would veto these tax hikes — as she should.

The majority of lawmakers should reconsider and find more sensible solutions, rather than opting for a partisan veto override.

In this broad recession — which affects rich and poor alike, and where recovery depends on people investing, buying consumer goods and donating to charities — a tax increase will put an unbearable strain on pocketbooks. And in an economy in dire need of a kick-start, that's a lousy idea.

Small-business owners who count their business income as personal income will find it more difficult to support and grow their enterprises.

This could mean more business closures, layoffs and far fewer job opportunities. It's a huge trade-off that's not worth the $48 million per year in revenue these increases are expected to pull in.

To make matters worse, lawmakers also want to squeeze more from the state's golden goose — tourism — by raising the transient accommodations tax from 7.25 percent to 9.25 percent. Senate Bill 1111 raises the tax, which applies to operators who rent places to visitors, by 1 percentage point in July and 1 percentage point in July 2010. This hotel-room tax will likely be passed on to tourists.

And that runs counter to the logic of reviving the state's flagging tourism economy: It makes Hawai'i more expensive while the visitor industry is desperately trying to make it more affordable. Hawai'i visitors already pay an estimated $25.79 per night in taxes, more than double the national average.

Rather than reaching a realistic compromise, the Legislature has set the stage for a political showdown — at the expense of taxpayers.

It's time for legislators to show leadership and courage — and make wise decisions that will benefit us all in the long run.