The 2009 Legislative Session has been called, among other things, a "rollercoaster of a ride".  It began with controversy over a possible ban on the ownership of pit bulls, a prohibition of fireworks, and a push for same-sex marriage, to name a few.  Introduction of these bills generated heated debate that engaged thousands of citizens in the legislative process.  While social issues appeared to be more sensational, it was the fiscal bills that moved steadily through the Legislature that resulted in changes that will affect us all.  Our current economic slump forced legislators to search for ways to generate additional income.  Three tax bills in particular were in sharp focus during the last few days of the session. 

• HB1741 increases the conveyance tax rate on all transfers or conveyances of properties with values over $2,000,000 and second home purchases. It also reduces the percentage of proceeds put into the Rental Housing Trust Fund and Natural Area Reserve Fund.  Bad news for the slumping real estate market as well as funds that exist for the greater good.  
• SB 1111 is a bill that will increase the Transient Accommodations Tax, otherwise known as the hotel tax.  A one percent increase to 8.5% effective July 1, and an increase to 9.5% effective July 1, 2010. For as long as we depend on tourism as Hawaii’s most important industry, we cannot afford to discourage travelers to our state. 
• HB1747 increases personal income tax for the high income tax brackets.  It creates new tax brackets for joint filers with combined annual income over $300,000, heads of households with incomes over $225,000, and single filers with incomes over $150,000.  While it may seem that this bill only taxes those who can afford it, such is not the case.  This bill can hurt small businesses across the state, many of which are already struggling.  Testimony provided by the Tax Foundation of Hawaii stated that this measure sends a strong message that Hawaii is not a place where one would want to invest or do business.  It also distinguishes Hawaii as having the highest tax rate in the nation. 

I opposed these bills because of the potential harm to our economy.  The Governor vetoed these bills for the same reason.   Such tax increases are dangerous.  They are double-edged swords that raise revenue at the expense of cutting into the potential for economic growth.  I have consistently resisted tax increases as a way to raise more cash to operate our government.    Higher taxes could prolong our economic recovery.  Alternatively, streamlining and modernization of government can have immediate as well as long-term benefits.   This session came to an end on May 8^th but there may be more action in mid-July when the legislature may reconvene to override more of the Governor's vetoes.   When the dust settles, we will begin to see the real impact of tax increases on the budget deficit.  As always, I welcome your input.  Mahalo.