Hawaii Rally, Protesters Bandy Tax Hike Proposal – NY Times

HONOLULU (AP) — Advocates for the poor and labor union workers rallied Tuesday for an increase in Hawaii’s version of the sales tax as anti-tax protesters urged the government to back off.

More than 200 people gathered at the state capitol to ask lawmakers for a 1-percentage point increase in the general excise tax imposed on goods and services. The tax, known as GET, is currently 4.5 percent on Oahu and 4 percent elsewhere in Hawaii.

They waved colored signs saying ”GET” and urged lawmakers not to eliminate jobs and services.

”The cuts are too deep. They are damaging the economy,” the Rev. Bob Nakata, a Methodist minister, told the crowd. ”It’s not just the bleeding hearts that are saying this needs to be done.”

Hawaii’s money troubles have resulted in less government support for public schools, child protective services, mental health, social service providers and agriculture inspectors. Hundreds of public employees were laid off, and the rest are taking pay cuts through furloughs.

Two Senate committees have approved the tax hike, but Senate financial planners intend to kill the proposal, which would raise about $458 million annually toward the state’s $1.2 billion projected budget deficit through June 2011.

”We’ll be able to balance the budget without using the GET,” said Senate Ways and Means Committee Chairwoman Donna Mercado Kim, D-Kalihi Valley-Halawa.

Even if it did pass, the Democrat-run Legislature lacks enough votes to override a likely veto from Republican Gov. Linda Lingle.

A group of about 20 tea party protesters waved signs nearby in opposition to tax increases. The signs said ”Overtaxation is tyranny” and ”T.E.A.: Taxed Enough Already.”

”The state, like all organizations in these times, needs to cut costs and waste instead of increasing taxes,” said Mike Fergus, who runs a commercial real estate business and carried a sign that said: ”Government union bosses: Unfair to all.”

”We need to get rid of some of the unionized deadweight in government,” he said.

Unlike a sales tax, Hawaii’s general excise tax is imposed every time goods and services change hands, not just at the point of retail sale. It would take a sales tax rate of at least 11 percent to generate an equivalent amount of revenue, according to the Tax Foundation of Hawaii.

Following the rally, supporters of the tax increase visited the offices of legislators to hand out pledge cards seeking commitments to vote for raising the tax.

They argued that state programs were severely slashed last year and that reducing them even more would cause more crime, unemployment and poverty.

”When people look at what services have been cut already, people will see that a temporary tax increase will restore some of those needs,” said Michelle Park, of the Coalition for a Drug-Free Hawaii, as she roamed the halls of the Legislature.

The Senate plans to find other ways to balance the budget without raising the general excise tax, Kim said. She has suggested increasing oil, liquor and cigarette taxes while taking a portion of counties’ hotel tax revenues, raiding special funds and deferring high-tech tax credits.

The state Republican Party and Lt. Gov. James ”Duke” Aiona said a GET hike would hurt residents by taking more money from their pocketbooks.

”We are already one of the most heavily taxed states in the nation,” Aiona said in a statement. ”During these challenging economic times, we need to encourage our small businesses to grow and flourish, not burden them with higher taxes.”

Hawaii Rally, Protesters Bandy Tax Hike Proposal – NYTimes.com

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