Council committee postpones general excise tax surcharge indefinitely

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HILO — Sometimes not to act is to act.

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HILO — Sometimes not to act is to act.

Facing a June 30 deadline to have an unpopular ordinance in place or lose the opportunity to do so, the County Council Finance Committee voted 8-1 Tuesday to postpone a bill indefinitely that would raise the general excise tax by one-half percent.

The committee, composed of all nine members of the council, was poised to vote 7-2 against Bill 165, a surcharge on the tax for transportation improvements, when council members on the losing end of the vote opted to postpone the bill instead. They noted that if it doesn’t come up on the next committee agenda in two weeks, it will be too late to meet a state-imposed deadline, allowing the bill to die.

Hilo Councilman Aaron Chung, one of the two supporters, summed it up this way: “In an election year, who the hell wants to raise taxes.”

Hilo Councilman Dennis “Fresh” Onishi, who is term-limited and not running for reelection, was the other yes vote.

Chung said the council should pass the measure, Bill 165, because it would give the county more bargaining power with the state Legislature. The tax wouldn’t kick in until Jan. 1, 2018.

It would raise about $20 million to $25 million annually for transportation capital and operating budgets, including mass transit projects, and projects bringing the county into compliance with the Americans with Disabilities Act.

The Legislature last year gave the county permission to raise its general excise tax by one-half percent, provided the county had an ordinance in place before July 1. The option was instead of an increase in the county’s share of the transient accommodations tax, known as the hotel tax.

“They’re going to say, ‘We gave you guys an opportunity,’” Onishi said. “Good luck to you guys in the future.”

South Kona/Ka‘u Councilwoman Maile David bristled at the apparent arm-twisting of the state.

“We’re being forced by the state to enforce this tax on our people to make up for the shortfalls (in the transient accommodations tax),” David said. “And to make matters worse, I think we’re on a forced deadline.”

Kohala Councilwoman Margaret Wille said it wouldn’t matter whether the county passed the general excise tax, as far as getting any future favors from the state.

“There are always going to be smokescreens and excuses for why things don’t get done,” Wille said.

Hamakua Councilwoman Valerie Poindexter said she was worried about seniors and disabled people in her community.

“I’m concerned about medication and food, that means the cost of living,” Poindexter. “That’s where my loyalty is, to my constituents.”

“It’s a trickle-down effect and this trickle will be the one that breaks the camel’s back,” Poindexter said.

The one-half percent surcharge would be applied only to the 4 percent tax assessed at the retail level, not on the half-percent tax on wholesale transactions, according to an analyst at the state Department of Taxation.

Proponents point out that one-third or more of the general excise tax is paid by tourists, thus spreading the tax burden. They say that the county has limited revenue options, and money not collected at the cash register would have to be collected from property taxes.

“It’s easy to spend money for stuff, but where’s the income generation,” Chung asked.

He suggested that property taxes could be lowered to make the excise tax hike more palatable.

Opponents say Hawaii Island’s cost of living is already too high, there’s a shortage of affordable homes and young people are leaving the island and moving to the mainland, where the cost of living is lower. Those opposed to the tax say the tax is regressive, which means it hurts poor people more than the well-off.

“An increase to our general excise tax is an increase to our cost of living as well as the cost of doing business,” said Tanya Power, a Realtor testifying from Kona.

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“You have to live within our means,” said Toby Hazel, testifying from Pahoa. “This need for more and more money is an addiction. Heal yourselves.”

Puna Councilman Greggor Ilagan was the sole no vote on the postponement. He wanted the council to vote the bill down outright, to send a clear message of opposition.

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