2011 Legislature Pau - No Balanced Budget, More Tax Woes For Business
By Sam Slom
President & CEO, Smart Business Hawaii
The 2011 Legislative Session adjourned its regular session May 5th (it began in mid-January) but likely will be in a Special Session by early June. The budget is still not balanced, the deficit is increasing, and several last minute bills were either messed up or left on the table (including funding for the November APEC Conference, payment for legal liabilities against the state and a flawed public employees salary increase moratorium).
Open rifts have developed between House and Senate Democrats, and Senators and the Governor. Also, there is dissention among union ranks and a strike is possible since collective bargaining agreements were not funded.
Not one business bill that would enhance our business and investment climate was passed. A well organized effort was successful in defeating the planned General Excise Tax increase, a new pension tax, the 50% liquor tax hike, the new soda tax, and the annual attempt to tax your internet sales.
With the good news comes the bad that $600 million in tax increases were still passed including motor vehicle weight and registration (the City likely will hike these taxes too), a $7.50 per day rental car fee, surcharges galore, and removal of current income and GET exemptions that will result in higher business, and ultimately, consumer costs.
It is becoming painfully clearer that the General Excise Tax exemptions the Legislature took away from airlines, shipping, contractors, sub contractors and sub lessees, as well as personal income tax exemption suspension, will have a devastating impact on Hawaii residents. Costs will rise and layoffs will increase. Several businesses have already announced hiring freezes, and possible layoffs because of the legislative action. As previously announced, several non-profits are harder hit and several are cutting personnel and operations and may cease operations.
There were new raids on the Hurricane and Rainy Day special funds. Other funds were raided and scooped into the General Fund to help balance the budget. No meaningful cuts or reductions in spending were enacted, only reductions in the Governor’s $900 million additional Executive Budget.
By Constitution, the two fiscal year (FY 12 & FY 13) budget must be balanced. It is not. The $1.3 billion deficit in January has increased to over $1.6 billion.
The Governor vetoed two bills on May 5: HB 382, relating to powers of the Auditor and SB 1416, relating to new car safety inspections. Doubtful that the Democrat Legislature will override these or future vetoes.
The tax day TEA Party held on April 15 to protest higher taxes.