Higher state taxes under consideration

Gov. David Ige’s administration is considering unspecified tax increases and “revenue enhancements” to help plug a projected $1.4 billion shortfall, members of the state Senate’s Committee on Ways and Means were told Monday.

State Budget and Finance Director Craig Hirai was unable to explain how much revenue the unidentified tax increases and revenue enhancements were expected to generate during awkward confrontations involving committee Chairman Donovan Dela Cruz (D, Wahiawa- Mililani Mauka) and state Sen. Sharon Moriwaki (D, Kakaako-McCully-Waikiki).

“I’m not sure. … I’ll get back to you,” Hirai said. “We’re still finalizing that. … We had some ideas, but we’d rather not … We’re reassessing what we’re doing right now terms of — in light of — circumstances for the biennium budget. We don’t want to get people excited about tax increases that may never be realized.”

Hirai said the administration is “looking more carefully at special fund transfers.”

Under repeated questioning from Dela Cruz and Moriwaki, Hirai was unable to specify how much revenue would be generated either through increased taxes, revenue enhancements or special fund transfers.

He said that any possible proposals would be articulated in a package of bills from Ige’s administration.

Hirai repeatedly looked at his watch and, at one point, put his masked face in his hands while testifying before the Ways and Means Committee.

“The governor is looking at all of the alternatives — could be tax increases, could be just revenue enhancements,” Hirai said at one point.

Before Hirai’s appearance, the Ways and Means Committee was told that Hawaii’s COVID-19- hobbled economy is showing glimmers of hope and that big improvements could come midyear — but likely not until 2022.

But when Hawaii’s once-robust tourist economy rebounds will depend on the availability of COVID- 19 vaccinations, which are rolling out across the country more slowly than originally promised.

“Basically, the story would be flattening out for the first several months of the year, then gradual recovery, accelerating as we get into the second half of 2021,” said Carl Bonham, executive director of the University of Hawaii Economic Research Organization. “The job growth happens at the end of 2021 mostly because that’s when we begin to see the effects of vaccination. So we actually see a strong performance of the economy next year.”

Eugene Tian, the state’s chief economist, said once COVID-19 vaccines are widely available, “the second half of the year, the economy will be better. The growth will be faster than expected. … The second half of this year is going to be good for Hawaii.”

For now, Tian said, Hawaii’s economy continues to struggle.

Some 10.7% of island businesses remain closed; The state continues to have the country’s worst unemployment rate; the leisure and hospitality industry saw a 52.1% drop in job growth through November; and Hawaii’s economy is expected to trail the rest of the country, which is expected to see overall growth of 4% this year.

“The U.S. economy growth is faster than Hawaii,” Tian said.

Locally, he said, “improvement is slow and small. … We still have a long way to go.”