LEGISLATURE DASHES TO ADJOURNMENT
General Excise Tax Issue Still on Front Burner

* Note: After this story was written, the Legislature went into overtime. The date of adjournment is now set for Wednesday, May 13.

The 19th Legislature is set to adjourn May 5 , but a last minute snag over key measures could result in an extension. This has happened in 9 of the past 10 years.There is even talk of a summer Special Session.

THE GENERAL EXCISE TAX INCREASE

The biggest battle continues over the proposed increase in the state's Gross Income, General Excise (not sales) Tax. The State House by a thin margin, again voted to support the increase 28-23 on April 14 while the Senate has said an increase is "non-negotiable." Disappointing to witness several legislators who previously signed pledges to the voters NOT to raise taxes, voting to raise taxes. SBH will publish their names next month.

The tax increase is the hallmark of the Governor's Economic Revitalization Task Force (ERTF), and by extension, the Governor's re-election campaign theme.The objectives are political-the reelection of the Governor and the continuing power of public employee union bosses - and have little to do with the economic plight of residents.

The original proposal called for a  34% increase with a provision for partial reduction in pyramiding of the tax. Changes resulted in a proposed 4.75% rate, then the Governor's idea of a 3-year "drop dead" clause. Right, trust the government to end a tax. Better the politicians proposing tax hikes drop dead!

Small Business Hawaii, other business groups, AARP, League of Women Voters and 26 of 32 Oahu Neighborhood Boards are staunch opponents of an increase in this regressive tax at any rate.

THE SUPPLEMENTAL BUDGET

In Hawaii, the 2-year state operating budget is adopted in odd-numbered year Legislative Sessions (1997). That budget totalled $11.6 billion. A supplemental budget follows in even years. The tax issue colors the House and Senate versions of the budget. The Senate version results in less of an income tax reduction with deeper cuts to programs and personnel but without an increase in the GET. The House budget draft saves programs and public employee salaries at the expense of an increase in the GET to 4.5%. People still confuse Hawaii's unique GET with sales taxes on the Mainland. If converted to a sales tax, Hawaii's current tax rate would equal 12-16% (without exemptions for food, clothing, medical, etc.).

WHAT ABOUT REVITALIZATION?

True economic revitalization requires a combination of pro business attitude, tax cuts, regulatory reform, government downsizing, accountability and tools and fiscal options such as privatization. Little has been accomplished during the '98 Session to enact meaningful reforms in these areas although several bills remain alive and in conference committees. Two national tax analysts, Dr. William Fox of the University of Tennessee and Hoover Institution's Dr. Alvin Rabushka, examined the most recent House, Senate and Governor's tax proposals and concluded neither would revitalize the dead last (of 50 states) Hawaii economy. Moody's Investment Service, the nation's largest bond rating company, downgraded Hawaii's debt issues (ranked #2 per capita in the U.S.) because of lack of confidence in the government's revitalization plans. It takes action, not rhetoric, to attract capital and provide genuine economic incentives. It's not going to happen until there is a change of political will-or political leaders here.

CON CON, B-BALL AND HARE-BRAINED DOG DAZE-BUT NO ECONOMIC REFORM

Lawmakers may give Hawaii voters one more chance to vote on a Constitutional Convention this November, despite strong opposition from the unions, Democratic party and other special interests. The court ruled blank votes should count as "no" after the '96 election. Court challenges have continued through early this year.

Despite continuing economic problems, lawmakers haven't gotten their priorities set and have gone to the dogs. Valuable time was spent debating a new law that would find owners guilty-and facing fines or jail time-for not providing "proper" dog (cat, rabbit, etc.) houses and care for their pets. Most owners can't afford their own housing. Is this a priority? Other bills involved live snake importation, definition of "wolfdogs," ban on circus elephants and $1million for an orangutan sanctuary opn the Big Island.

Politics aside, the House beat the Senate in the annual Legislative basketball game this year at Klum Gym on the UH Manoa campus. Rep. Eric Hamakawa had his ankle broken in three places and a Senate staffer broke his wrist. Work comp anyone?

The worst part of the Session featured unconstitutional "bundling" of several different bills into an omnibus measure-without benefit of public hearing or input and tax breaks or subsidies inserted in bills after they had been voted upon in committee (such as funding a private parking garage in Kaka'ako and a tax break for Real Estate Investment Trusts (REITs). The State wants to buy the formerly private Waiahole water Ditch from Amfac / JMB and proposes lots more new fees (taxes?), Class-C felonies and regulations.Is it any wonder voters are angry?

PRO, CON TAX RALLIES HELD AT STATE CAPITOL

The contrasts were stark between the peoples "Hawaii Tea Party '98"(HTP) rally against increasing taxes held March 27, and the Governor's Economic Revitalization Task Force (ERTF) rally April 6 supporting tax increases. Most viewers never thought they'd see a rally to INCREASE taxes in the most-taxed state.

The HTP, created by radio personalities Rick Hamada and Barry Villamil, was co-sponsored by KHVH Real Radio 830 and Small Business Hawaii, and was held from 6-9 am. It drew an estimated 1,500-2,000 attendees; a broad, diversified, enthusiastic cross section of isle residents-many of whom stayed for 3 hours or more. It was a happy crowd, passionate in their call for "No New Taxes!" They vowed to, "Remember In November!" a wakeup call to those politicians who would vote to raise taxes now. There are several other alternatives.

The ERTF, organized by the Governor's campaign committee, and the public service union heads and big, regulated, dependent businesses who publicly support him, was a slick, well organized, mandated attendance event that featured bread, circus and lavish entertainment. It attracted about 3,000 people - most bussed into the event by employers or union heads, or granted free parking on state property. It was reported as "the best rally money could buy."

At the HTP, anyone was welcome to speak and give their views; at the ERTF, only those in full, lockstep support of the special interest revitalization/reelection plan were permitted to voice their opinions. At one point, Governor Cayetano said, "...if there is another plan (besides ours) out there, let me hear it..." At that point, State Representative Quentin Kawananakoa, Minority Leader, hurried to the stage to enlighten the Governor. He was physically stopped by the Speaker of the House and Majority Leader who would not let him speak. The ERTF was in charge of the First Amendment also.

The Hawaii Government Employees Association union (HGEA) subsequently used compulsory union member dues to float many erroneous ads claiming the GET hike would amount to only "37¢ a day" (more). The actual figure is closer to $550-plus per family of four per year. No matter, HGEA workers and retirees also called lawmakers pleading to raise taxes so the public employees-there are 10,000 more now than 7 years ago-could keep their jobs and get a pay increase while 23,000 private sector employees lost their jobs during the same period. (Most union members were totally unfamiliar with ALL 60 ERTF proposals, impact of the GET, which several misread from their scripts as the "GTE tax," and the fact that other non-tax alternatives exist).

On May 1, KHVH sponsored TEA-2, a final effort aimed at stopping a tax increase. More than 1800 people showed up at TEA-2. At least these rallies brought many people to THEIR Capitol who had never been there before. The final results will be recorded at Session end, or on Election Day, November 3.

Photos of both rallies are posted at Mel's Hawaii Tea Party '98 website.

SBA AWARDS LUNCHEON
RECOGNIZES TOP BUSINESSES

Hawaii's top small business owners and advocates will be honored at a reception and luncheon on Thursday, May 21, in the Pacific Ballroom of the Ilikai Hotel Nikko in Waikiki. The Eleventh Annual Small Business Awards Luncheon will recognize the achievements of 29 winners from across the state.

L&L Drive In's Eddie Flores Jr. and Kwock Yum Kam were named as the SBA's 1998 Small Business Persons of the Year for the State of Hawaii. Charles Wesley Fortner of Island Page Inc., was named the state's Young Entrepreneur of the Year.

SBH is a co-sponsor of the luncheon event. A complete listing of Hawaii's winners are posted here and listed in the printed edition of the newsletter.

Part of a 35 year old tradition established by the President of the United States, the SBA awards are among the most prestigious honors in the small business community. Business owners are recognized for their staying power, growth in revenues and jobs, response to adversity and contribution to their community. Hawaii's Small Business Person of the Year will join the celebration in Washington, D.C. during National Small Business Week from May 31 through June 5, 1998.

The Statewide Luncheon begins at 11:30 a.m. with lunch served promptly at 12:00. Cost of the luncheon is only $35 per person, with reserved tables available for parties of ten. Advance reservations are greatly encouraged due to limited seating. For more information, contact the U.S. Small Business Administration at 808-541-2990.

"OPPORTUNITIES OF THE PACIFIC" WORKSHOP

A two-day conference will take place May 28-29 at the Outrigger Prince Kuhio Hotel to showcase the trade, business and investment opportunities which exist in the Pacific Islands, with partipants from both the public and private sector. Workshops will be conducted in conjuction with the conference to encourage small and middle sized businesses to look beyond Hawai'i and to become familiar with some of its nearest neighbors in the region. Five countries/territories have been invited to participate: the Cook Islands, Fiji, French Polynesia, Samoa, and Tonga. These five areas have relatively good airline connections with Hawai'i, enjoy political stability, and have significant economic potential.

Registration is $75 for the two day event [Breakfast and lunch is included] or single day registrations at $40 are available. For more information, contact Daniel Foster, Conference Coordinator/Spokesperson. Telephone: 808-944-7782 or 808-944-7724, Fax: 808-944-7670 or E-Mail: Foster@ewc.hawaii.edu.

BUSINESS WRITING SEMINAR MAY 13

A half-day seminar, "Business Writing Made Easy" is being presented by Aloha Press, a member of Small Business Hawaii, on Wednesday, May 13, from 8:30 a.m. - noon, at the Ala Moana Hotel, in the Garden Lanai Conference Room.

Attendees will learn how to make business documents easy to write, easy to read, and easy to understand. Simple "how to" examples will be handed out. Discover how to write or edit better letters, memos, reports, and proposals by attending the seminar.

Registration is by mail, phone or fax. Aloha Press accept checks, purchase orders, and VISA or MasterCard credit cards. Please indicate the names of the people attending. For information, call 396-4622 or Fax 296-3450. Make your check payable to Aloha Press, and mail to: Box 4183, Honolulu, HI 96812. The fee is $65.

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