December 22, 2009

Hawaii: A Budgetary Shell Game, or Just Train Robbery?

This week Hawaii Governor Linda Lingle released the outline of her budget proposal for next year. It's not a pretty picture: the two most prominent tax policy changes in the Lingle plan are a money grab from county governments and a money grab from... the future.

It's true: following up on a similar threat last year, the state would simply stop allocating revenue from the "Transient Accomodations Tax," as the Hawaii hotel tax is known, to counties. The law says that just under half of all TAT revenues should be allocated to the counties. Under the Lingle plan, the state would simply not do that next year, and would instead keep the money to help balance the state budget. Of course, this would leave counties with a budgetary hole of their own, which they'd have to patch by either hiking property taxes or cutting spending. A great deal for the state, and it's only a bad deal for those Hawaii residents who live within a county. Which is to say, all of them.

House Ways and Means Chairwoman Donna Mercado Kim thinks this is actually a pretty good policy. How, you ask? Here's the money quote:
It's a re-occurring pot of money, which is good.
That's right. Once you've taken the counties' lunch money in one year, you can go right back and do it again as long as you want! This isn't really what advocates of sustainable taxation have in mind when they urge states to find recurring (as opposed to one-time) revenue sources...

The second half of the Lingle budget's tax plan amounts to sending an IOU to next year's budget. Under Lingle's proposal, any income tax refunds due as a result of April filings wouldn't be paid until after the next fiscal year begins on July 1. That way, these refunds don't count towards this year's budget. Who are the losers under this plan? Well, anyone who's owed a refund when they file their 2009 taxes, since these guys will basically be asked to give an interest-free loan to the state until July 1. And more fundamentally, whichever legislators are around to deal with the mess during the next fiscal year, since really all this move does is to put part of this year's budget deficit in a box and mail it to next year.

Not the most inspirational stuff.


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