Two state Senate committees today advanced a general-excise tax increase to help with the state's budget deficit, arguing that a hike in the broad-based tax was more equitable than targeted tax increases on businesses that would likely be passed on to consumers.

The Senate Economic Development and Technology Committee and the Senate
Commerce and Consumer Protection Committee backed a 1 percentage point increase in the GET through December 2012. The tax increase would raise the GET from 4 percent to 5 percent, or 5.5 percent on Oahu because of the surcharge for the Honolulu mass transit project.

The committees also agreed to a state earned income tax credit to help offset the GET increase on the poor, since the GET is considered a regressive tax.

The committees swapped the GET hike in a House bill that would have generated $100 million a year by eliminating GET exemptions on several business activities and imposing a 1 percent GET on those activities.

The committees also discarded House-approved bills to increase taxes on insurance premiums, impose an insurance premium tax on the Hawaii Medical Service Association and Kaiser Permanente, and reduce or defer high-technology investment tax credits.

State Sen. Carol Fukunaga, D-11th (Makiki, Päwa'a), the chairwoman of the Senate Economic Development and Technology Committee, said the House options would have severe long-term economic impacts on businesses.

State Sen. Rosalyn Baker, D-5th (W. Maui, S. Maui), the chairwoman of the Senate Commerce and Consumer Protection Committee, said the taxes on businesses would end up "being passed on to working families and other consumers."

Fukunaga and Baker said economists have estimated that 38 percent of the GET is paid by visitors to the Islands, which could soften the impact of a tax increase on residents.

The Senate passed a GET increase last session that is still alive in the House. House leaders chose not to advance their own GET bill this session, however.

State Sen. Donna Mercado Kim, D-14th (Halawa, Moanalua, Kamehameha Heights),
the chairwoman of the Senate Ways and Means Committee, questioned the wisdom of advancing the GET increase when it is doubtful that there are the votes in the House and Senate to override an almost certain veto by Gov. Linda Lingle.

Kim's committee will review the GET proposal.

State Senate President Colleen Hanabusa, D-21st (Nänäkuli, Mäkaha), said she would wait to see how the Senate Ways and Means Committee handles the issue. She also doubted there were the votes in the Senate to override a veto.