Coming in for the Kill

The Hawaii State Legislature opened yesterday with lawmakers talking about tax cuts, raiding the unemployment fund, deferring or capturing the 12.5 percent general excise surcharge that now goes to the city’s rail project, tweaking the ACT 221 high technology credit, and legalizing gambling.

However, the discussion of “tax relief” is just a smokescreen to keep taxpayers appeased until lawmakers come in for the kill. With a $1.8 billion deficit on the horizon, there is no way taxpayers will get tax cuts unless they have a strong public force at the capitol this session – and based on the past decade, that will be a challenge of monumental proportions even though Hawaii is already the fourth highest taxed state in the nation.

Democrat lawmakers who control the legislature with over 90 percent of the seats, and Republican Governor Linda Lingle, are already actually planning several tax increases, including tax hikes on cigarettes, alcohol, other “sin” products, gasoline, motor vehicles and virtually anything else they can tax.

Taxpayers Being Railroaded

Despite a pledge in 2005 to keep the city’s 12.5 percent surcharge for the city’s rail project, the Legislature and the governor are considering a plan that would move those revenues from the city’s rail transit project to the state general fund – and then extend the tax over the 15 years it is already in place (which would be another broken promise).

That’s not likely to happen, however much as the Senators may want it for their own political reasons. That’s because Hawaii’s Senior U.S. Senator Daniel Inouye has personally put his stamp of approval on the project and any delays due to funding issues won’t be tolerated.

Political careers will be launched on the back of the rail, and millions of dollars in campaign fundraising for local Democrats will be spurred by the billions of dollars going to be spent by taxpayers on rail construction, engineers, architects, contractors and public relations people.

Roll the Dice

As to gambling, that’s not likely to be legalized here either because public polls show strong opposition.

Hawaii is one of two states (the other being Utah) with no form of legalized gambling or lottery.

People here enjoy cheap trips via Hawaiian Airlines to Las Vegas where they meet their friends and family at the California Hotel and gamble the night away.

That tradition – and all the people from Hawaii who’ve moved to Vegas – earned the “city of sin” the nickname “Hawaii’s ninth island.”

There’s also plenty of underground gambling here already, albeit illegal, not taxed and primarily run by various ethnic mobs.

But the talk of gambling will keep the public distracted while other devious proposals are passed.

Taxpayers, Going for a Ride

The vast majority of the lawmakers in the big square building believe, like FDR did, that the way to stimulate the economy is to raise taxes and increase government spending and increase government bonded debt.

Thus a series of construction projects being unveiled this year and last including highway, harbor and airport modernization plans totaling more than $11 billion over the next few years.

Today, the Department of Transportation Director Brennan Morioka, flanked by Senate Transportation Chair Kalani English, D-Maui County; House Transportation Chair Joe Souki, D-Maui; and Gov. Linda Lingle, unveiled their 6-year, $4 billion highway expansion project.

See their report here: "State Unveils Six-Year $4 Billion Highway Modernization Plan" http://www.hawaiireporter.com/story.aspx?0f9a9d2e-6a48-4e6a-b7c0-5cc14e7a00d7

Their proposal will be funded by a series of tax and fee hikes including:

• A 10-cents-per-gallon permanent tax hike on gasoline (from 17 cents to 27 cents a gallon). Hawaii already has the highest combined federal, state and local gasoline tax in the nation at an average of 66 cents per gallon. That will increase to an estimated 76 cents per gallon;
• A $20 hike in the state vehicle registration fee (from $25 to $45 – these amounts are in addition to city fees already charged);
• An increase in the state motor vehicle weight tax from ¾ cents per pound to 2 and ¾ cents per pound (in addition to city vehicle weight charges);
• And a $2 additional surcharge on rental car fees per day (from $3 a day to $5 a day). Recents statistics have shown that nearly 35 percent of residents use rental cars.

Molokai and Lanai, which already have the highest gasoline costs in the state, and aren’t benefitting from the projects, will be exempted from all the tax and fee hikes, English says.

Their pitch: The plan, once completed, will save time, save money and save lives.

• Time, because those driving in from Kapolei will cut their driving time from 65 minutes to 30 minutes in peak traffic hours; Maui drivers will also see their transit commutes to Kahului cut, English says.
• Money, because even though the tax is being hiked on the gasoline and there are other fees, Morioka says the roads will be in prime condition so there will be a decrease in car repair bills and gasoline used;
• Lives, because 140 people die on Hawaii roads every year, and Morioka says better roads means at least 40 lives will be saved a year reducing fatalities from 140 to 100 every year.

According to the state’s own figures, the transportation fund, which is fueled by state gas taxes, is in a $85.9 million deficit in FY 2009. See the chart here: Highway fund chart

Where did the money go?

House and Senate Democrats raided the DOT highway fund to the tune of $140 million over the last decade to fund their own district projects.

None of that $140 million was spent on improving the roads and highways and making bridges safer, as it was supposed to be.

So what keeps Democrats from raiding the Highway fund after raising the gasoline tax by 59 percent?

Nothing other than a statement in the bill that says the money can’t be used for any other purpose but highway, bridge and road improvements, which can easily be changed by lawmakers in the future once the money is in hand.

Morioka says the governor’s administration and lawmakers realize that Hawaii residents are already suffering in this economy, so they won’t implement the tax and fee hikes until the economy shows improvement two quarters in a row. Economic improvements are measured by the state itself through the Department of Labor – the benchmark is a 1 percent increase in jobs each quarter for two quarters in a row.

It will be up to the public to hold the state accountable for the projects being done on time and on budget, Morioka says, noting all expenditures, timelines and contracts will be posted on a state web site. Morioka won’t be there to see the project through – Gov. Linda Lingle’s term ends in 2010, and Morioka is her appointed director. He says his staff is committed to seeing the project through.

Some concerns were already brought to light by the media:

Some of the projects may prove to be controversial to residents or businesses in the affected areas.

What happens to existing traffic while the highways are under construction?

Red lights cameras, with the revenue going to the city and county, may be passed as a part of this legislation. There is opposition to the use of red light cameras in the Legislature and the public. Some lawmakers have pointed to other areas of the country where these have become an instrument to raise revenue rather than an instrument of safety.

These proposals still face a long and difficult and legislative road before the session’s adjournment on May 7 and will face scrutiny of public hearings in the House and Senate.

Up In Smoke

Now on to the "sinners" in our community - you know who you are. No I am not talking about murderers, rapists and robbers. I am talking about you smokers and beer drinkers.

The governor’s administration has already announced proposals to raise the cigarette tax by 20 cent a pack. That will be on top of the federal $0.61 per pack tax hike already coming this year to fund a federal children’s health initiative.

At some point, there is a financial tipping point and people stop smoking.

Now that might seem like a good thing to non-smokers or former smokers who don’t like tobacco and don’t want other people to smoke. But there are also consequences.

How is the cancer center funded at the University of Hawaii? How are so many other projects funded in Hawaii and throughout the nation? How are all those anti-smoking commercials funded? How is the smokers’ rehab center funded? How is our general fund partially balanced?

Yes, that all comes out of the pockets of smokers. Take 10 percent or 20 percent of them away, and that’s a big drop in cigarette tax, and thus a big reduction in funds for these groups and projects and the general fund.

In reality, although the government officials won’t admit this, they really need people to keep smoking because a lot of people are counting on that money.

This Bud is for You, Lawmakers

And smokers aren’t the only "sinners" who will have to hold on to their wallets this year. Anyone who enjoys a beer, wine, or hard liquor will likely be paying more too.

How about a taxpayer toast to less government spending, better management and more honesty and transparency in government?