Sharing The Pain In State Deficit

Dan Boylan
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Wednesday - April 22, 2009

Oh my. What shall we do? That question, asked in much that way, has haunted the Capitol for months now. Republican Gov. Linda Lingle has said that, despite earlier assertions that everything was on the table, she will veto any attempt to raise taxes to deal with the state’s budget shortfall.

Huge Democratic majorities in House and Senate have responded that “tax we must.” The Republican governor and the Democratic legislators do agree that cuts in government spending must be made. That means the elimination of programs and positions, a process that began months ago and will continue in the months to come.

But there’s a new urgency about the need to raise taxes. It comes from a report from the state tax department that collections for the first nine months of the current fiscal year are down 6.3 percent, rather than the 5 percent predicted by the Council on Revenues. As a consequence, both the Senate and House versions of the budget include tax hikes.

So whom - and what - will they tax? The Senate wants tourists to pay through an increase in the hotel room tax. Senate president Colleen Hanabusa pointed out to Honolulu Star-Bulletin reporters that such an increase would be “paid by people who come here ... we are trying to eliminate the hurt for our own residents.”

Senate Ways and Means Committee chair Donna Mercado Kim emphasized that the origins of the tax hike were in the House. “With limited revenue bills and a growing deficit,” Kim told the Bulletin, “the committee had no option but to consider the House’s bill retaining the entire transit accommodations tax (hotel room tax).”

To offset the loss of accommodations tax revenues to the counties, legislators would allow them to pass up to a 5 percent sales tax on top of the state excise tax. Some of the sales tax funds would, of course, be paid by tourists as well.

No politician likes to raise taxes. Republicans go into convulsions at the thought of it. Democrats talk about it defensively. Republicans don’t want to tax anyone. Dems will tax rich people.

But when the state faces a $1.8 billion state budget shortfall, is there an alternative? Gov. Lingle thinks it is to be found cutting the salaries and benefits of state workers. That will require collective bargaining negotiations with the unions, negotiations that are in process or about to begin.

Should unions balk and Lingle hold to her commitment not to raise taxes, there may well be reductions in force in the number of teachers, social workers, healthcare providers - you name it, in all the services state workers provide.

Many in the electorate believe that’s just fine. Government workers are, after all, lazy and incompetent. The virtues of competence and industry, after all, are only to be found in the private sector. You know, the kind of competence and industry we find in the private banking, automobile manufacturing and investment sectors of our economy.

Therein lies the rub. At few times in our history has the private sector been in such low repute. The bloated salaries of private business executives grew throughout the Republican hegemony of George W. Bush. Bush and Republican majorities in Congress gave the nation’s business leaders three massive tax cuts, while some of the highest paid of those businessmen and women gave us sub-prime mortgages, toxic assets, near-bankrupt automobile companies, a collapsed housing market, a plunging stock market and a global recession.

Yet when House Budget Committee chair Marcus Oshiro talks about raising state taxes - minimally - on the wealthiest among us, he is told that he’s suggesting “class warfare.” Further, he’s told, it’s bad policy to raise taxes on the wealthy in these bad economic times.

The logic in this is that you should lower taxes on the rich in good times, keep taxes low on the rich in bad times, which some of them did much to create, and bail them out when disaster looms. Huh?

We’re all going to have to carry our weight - state workers, certainly, but taxpayers as well from whatever sector they may come: private, public and touring.

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