Posted tagged ‘taxes’

Will a higher threshold make the pension tax palatable?

March 9, 2011

It’ll be interesting to see if the proposal in the Legislature to tax pensions continues to draw the political ire of seniors now that the House has set the income threshold at nearly three times higher than originally proposed by Gov. Neil Abercrombie.

Hawai‘i  is one of only 10 states that don’t tax employer-provided pensions, and Abercrombie raised a fair point about whether that should change given the state’s precarious financial situation.

But he set the income threshold way too low at $37,500 for singles and $75,000 for married couples, which would have taken a big chunk out of the anticipated retirement income of middle-class citizens who could ill afford the loss.

The governor also failed to properly index the tax, which would have placed an unfair burden on those who fell just over the limit.

The House removed a lot of the immediate sting by raising the income threshold to $100,000 for singles and $200,000 for marrieds.

Rep. Isaac Choy, an accountant who is respected for his facility with numbers, estimated the tax will apply at this point to only 3,000 high-income taxpayers who can afford it, and the rest will have 15 to 20 years to prepare before inflation pulls them into the grip of the tax.

What remains to be seen as the measure moves to the Senate is whether nervous retirees and those soon to retire — a politically potent bunch — will be relieved by the reprieve or if they’ll continue to view any new tax on pension income as an ominous threat.


Guv’s campaign promises upended by reality

March 2, 2011

When Gov. Neil Abercrombie was pressed during last year’s campaign by opponents Mufi Hannemann and James “Duke” Aiona on how he was going pay for his proposals, he’d typically answer, “Why do you it assume it will cost more?”

He said he’d cover the state deficit and pay for new programs by re-prioritizing, reallocating and tapping federal funds that he claimed the state wasn’t taking advantage of.

Abercrombie derided Aiona’s proposal for an audit of the Department of Education and Hannemann’s call for a comprehensive audit of state finances, saying he was ready to hit the ground running and didn’t need any audit to tell him the score.

Well, now that he’s finally coughed up a budget four months into his administration, it seems that his opponents were correct that his plans are going to cost more; he wants to spend several hundred million dollars more than proposed by the previous administration.

Abercrombie is relying mainly on tax increases of various kinds to finance his plans, with relatively little sign of re-prioritizing and reallocating. There have been few announcements of new federal funds coming Hawai‘i’s way.

He not only made big campaign promises, but was especially cocky in purporting to know it all as to where we stood and what needed to be done.

If truth in advertising has any meaning anymore in political campaigning, the governor owes us a better accounting of how his proposals stack up against what he promised.

Did Abercrombie open the door for a GET increase?

February 17, 2011

Is anybody else starting to feel that Gov. Neil Abercrombie is getting a little wiggly on raising the general excise tax, which he promised not to do in his campaign for governor?

On the KITV4 morning show Monday, Abercrombie wouldn’t rule out a GET increase because of unfunded pension liabilities that are threatening the state’s bonding authority. The pension problem was well-known when he made his campaign promise.

Then yesterday, Abercrombie’s spokeswoman Donalyn Dela Cruz told the Star-Advertiser’s Political Radar that the governor doesn’t support a GET increase and didn’t propose one in his legislative plan, but added, “If a measure to raise the GET passes out of the Legislature because other elements of his plan are not adopted, he will of course consider it as the people’s will.”

Looks to me like a big wink to legislators that if they pass a GET increase, he won’t veto it.

It’s interesting that he’d consider what the Legislature might want to be the “people’s will” ahead of the clear will of the people who elected him on a promise of no GET increase; according to the recent OmniTrak People’s Pulse survey that Dela Cruz was commenting on, 68 percent of the public opposes an excise tax increase.

There was no wiggle room in what Abercrombie promised. His Recovery and Reinvestment Plan released during the campaign stated:

The General Excise Tax will not be raised. Given the public’s lost confidence in government, no reasonable argument can be made to raise the GET. Government will have to make better use of the revenues that it has and grow the economy if more revenues are needed.

In a September candidate forum with Mufi Hannemann, Abercrombie said, “I’m against raising the GET tax without equivocation.”

The governor reiterated his opposition to a GET increase in December, leading House Speaker Calvin Say to declare, “The general excise tax, which is so regressive, is off the table. It’s a Christmas gift to all the general public.”

Are we looking at a special Easter resurrection?

Big box office at the Capitol

February 15, 2011

Here’s hoping the starry eyes of our state legislators won’t prevent them from taking a hard look at the numbers before giving their blessing to a proposal for fat tax breaks to attract movie studios to Hawaii.

Relativity Media and partner Shangri-La have promised to build film studios on O‘ahu and Maui if they get tax incentives that would cost the state an estimated $46.3 million a year. Promoters say it could result in 20 movies a year being filmed in Hawaii.

To sell the idea, they enlisted written testimony from former President Bill Clinton as well as in-person appearances by prominent film stars, and threw a private Valentine’s Day party for lawmakers at a posh hotel.

It’s difficult to evaluate whether it’s a good idea or not based on the information we have, but it’s of concern that the proposal came in late and is sketchy in its details as to the economic benefits Hawai‘i would receive in exchange for the tax credits.

Relativity CEO Ryan Kavanaugh says it’s cost-prohibitive to film in Hawai‘i under the existing tax structure, but we have two TV series currently filming here and a bunch of recent movies.

Legislators in both houses were wise to delay decision-making until they get more information on how much new economic activity we can expect, how many jobs will be created and whether they’ll be quality permanent jobs for local residents or temporary positions that involve a lot of people flying in from the mainland.

Democrats go mindless on taxes

December 9, 2010

While local Democrats celebrate their near sweep in the recent election, their counterparts in Washington are proving the old Will Rogers line: “I am not a member of any organized political party. I am a Democrat.”

Congressional Democrats have made jokes of themselves by bashing their own president for cutting a necessary deal with Republicans to preserve tax cuts for the middle class and secure benefits for the unemployed in exchange for also temporarily extending tax cuts for the wealthy.

They get their butts kicked in the election and they respond by fighting with each other instead of the other side.

We should remember that President Barack Obama had to negotiate a compromise with Republicans only because Democratic lawmakers, who control both houses, couldn’t deliver the votes to support the bill they and Obama wanted to end the tax cuts for the wealthy.

If you don’t have the votes for the deal you want, you negotiate the best deal you can get, and that’s what Obama did. If the Democrats’ prospects improve, they can fight it again when the tax cuts expire in two years — and between now and then, they can do all the railing they want to hold Republicans accountable for pandering to the rich.

What’s the point of a protracted fight the Democrats can’t currently win that only sticks it to middle-class taxpayers and the unemployed? If the Democrats don’t have the votes now, winning the fight only diminishes come January when the GOP takes over the House and picks up seats in the Senate.

Since when is it weakness to pursue responsible compromise when you lack the votes to have it all your own way?

Our own Democratic Sens. Daniel Inouye and Daniel Akaka had it right when they said they’ll will support Obama’s compromise to help working families despite their strong reservations about extending tax cuts for the wealthy, which Inouye said will cause him to  “hold my nose.”

Akaka said, “Working families in Hawai‘i need our help to put food on the table. They will spend the money locally and help our economy. I simply cannot allow these middle-class tax cuts to expire or abandon the unemployed during these tough times.”

Will Aiona veto HB 444?

June 9, 2010

Lt. Gov. James “Duke” Aiona’s veto of a bill suspending technology tax credits has some civil unions advocates sweating that he’ll also veto HB 444 while Gov. Linda Lingle is away in China.

Odds are she’ll veto civil unions herself after she returns, but supporters take a small measure of hope from the fact that she’s never publicly spoken against it and doesn’t share Aiona’s strong religious views against gay unions.

Aiona is acting governor while Lingle is out of state and has the legal right to take whatever action he wishes, but Lingle specifically said he wouldn’t act on HB 444 in her absence and presumably there’s an understanding given the close relationship they’ve had.

Lt. Gov. James "Duke" Aiona

The veto of SB 2401, the three-year suspenson of technology tax credits, was a good call by the administration and an apt way to help Aiona look gubernatorial as he revs up his campaign to succeed Lingle.

Because of a lack of transparency, there are doubts that the tax credits have produced the number or quality of high-tech jobs promised, and the law creating the credits deserves a thorough review going forward.

But it isn’t kosher to take away tax credits from companies that have already made investments based on the promise that tax credits would be forthcoming. Hawai’i doesn’t need another black eye as a lousy place to do business.

The Legislature could still override Aiona’s veto, but lawmakers should let it be. The $93 million the bill was supposed to save likely would be tied up in litigation, and improving state tax collections seem on track to make up the difference.

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