The great train heist
February 4th, 2009 by David ShapiroIt's always fun to watch the chickens come home to roost in local politics.
When the Legislature authorized the city to levy a half-cent excise tax to pay for rail transit, Gov. Linda Lingle didn't want the state involved in collecting the tax and threatened to veto the measure if the city didn't collect the tax itself.
But lawmakers insisted the state should collect the tax so they could skim 10 percent off the top for nonexistent collection costs, Mayor Mufi Hannemann supported the arrangement and Lingle gave in.
Flash forward to budget crisis of 2009.
Now Lingle, who warned that bad things would happen if the state had a hand in collecting the transit tax, is talking with legislators about raiding the money to help balance the state budget.
Hannemann, who made his deal with the devil and let the Legislature have its way, is screaming "foul."
Entertainment value aside, proposals to raid the transit tax are bad policy and very possibly illegal. I take a closer look in my column in the Opinion section of today's Advertiser, "State on thin ice in tapping transit tax."
Tags: budget, Legislature, Linda Lingle, Mufi Hannemann, rail transit
February 4th, 2009 at 6:56 am
If I recall correctly, the city tech people were saying that setup costs to collect the tax were over $50 million. To say "lawmakers insisted the state should collect the tax so they could skim 10 percent off the top" is rather misleading. Does it cost the state 10% to do the collection? Probably not, but it does cost something, although it's cheaper than if the city did it. The 10% should probably be adjusted at some point, but you can't argue that it was cost effective for the state to do the collection, and I'd say it's rather iffy to impugn the motives of the lawmakers at that point in time.
February 4th, 2009 at 7:08 am
Dave,
You nailed it when you wrote ..."If a tax paid by O'ahu residents only is siphoned by the state, Oahuans would effectively be taxed at a rate of 4.5 percent for the same state services that residents of other counties get for a tax rate of 4 percent." It is about fairness.
February 4th, 2009 at 7:54 am
The 10 percent was dumb from the start. They should have just stipulated that whatever the cost to collect the tax would be deducted before the funds were given to the City. This would arguably be a higher figure the first year (mayve two), and then drop to basically an admin fee.
February 4th, 2009 at 8:44 am
Shapiro aims, releases, the arrow cuts through the BS and continues on to hit dead center of the target. It's 10's across the board.
February 4th, 2009 at 8:50 am
The state's 10 percent cut of the transit tax was $30 million of the $300 million collected in the first two years. If the tax ultimately pulls in the $4 billion the city hopes over the 15 years, the state's skim will be $400 million. State tax director Kurt Kawafuchi estimated the state's setup costs the first year at $4.5 million — a third of the state's 10-percent cut that year — and now that the setup work has been done, the tax department has estimated the annual collection costs as a negligible $700,000 this year against the more than $16 million they're skimming.
The Legislature has repeatedly refused to return the overcharge even when the state was running a big surplus. When Hannemann asked for the overcharge back last year, Kalani English essentially said he made his deal to let the state have its vigorish and should shut up. When the City Council asked for the money back in Oct., Calvin Say said they should shut up or the Legislature might increase its cut to 20 percent. Looks like they might do worse.
February 4th, 2009 at 9:43 am
I think Calvin Say was making a joke. It should be taken for what it's worth. And Dave, if you're going to use words like "vigorish," well, you are definitely acknowledging you have a sense of humor. LOL!
February 4th, 2009 at 10:22 am
As a mayor, Lingle was for home rule. Funny how things change when one becomes governor.
Aloha
Keahi
February 4th, 2009 at 11:22 am
The state people should be happy with the money they're getting, however wrong it might be, and shouldn't mess with any county monies, period, whether it's the transit surcharge, the hotel room tax et al.
Makes you wonder, as Hanabusa and Lingle-Aiona suggest, if EVERYTHING is really on the table, or just those things they can stick their mitts in to grab...I don't see a lot of things on the table that should be on the table if in fact, everything's on the table.
February 4th, 2009 at 12:28 pm
The C&C should repeal the half percent train GET, and replace it with a gasoline tax. The C&C already collects a gasoline tax, so tax collection costs should be negigible, so the gasoline tax doesn't even have to be revenue neutral, it only needs to be 90% of the train GET. So it would be an overall tax cut to all O'ahu taxpayers.
I estimate that this tax would need to be around 75 cents/ gallon, which would bring gas prices up to around $3 right now, still far less than the highest prices we saw last year.
There's be a lot of benefits to higher gas costs--reductions in traffic and pollution, and less money leaving the island for petroleum exporting countries whose politics may be at odds with ours.
I can't think of any such benefits from the GET.
The State folks who want to grab, or hold onto, all or part of the train GET want to raise taxes without being honest enough to admit to raising taxes.
February 4th, 2009 at 3:21 pm
Watch for a last minute move by the legislature, during a House-Senate conference committee meeting, on a GET entitled bill to up the statewide tax to 5%. County gov'ts will get an apportioned share of .5% but lose other general fund appropriations. Because of C&C Honolulu's larger population, its take will remain the same or increase slightly. The other counties may get less than previous years but will agree because they are facing substantial cuts anyway due to the other tax collections shortfall.
February 4th, 2009 at 4:13 pm
Forward Observer, that's pretty close to my bet, which is that all this is leading up to a "temporary" statewide GET increase that inevitably becomes permanent.