National and local Republicans are scolding the Democratic nominee for Hawaii governor, accusing him of raising taxes and fees.

Perhaps the strongest attack concerns a proposal for increasing the state’s general excise tax by 25 percent three years ago. The GOP claims that, as chairman of the state Senate Ways and Means Committee, David Ige was the architect of a draft of a bill that called for the GET hike in 2011.

Ige says his opponents are distorting the way the legislative process works and do not understand its complexity. As committee chairman, Ige said he had a responsibility to balance the budget. In April 2011, the state faced a projected $1.2 billion deficit.

The senator did not want to accept Gov. Neil Abercrombie’s plan at the time to tax the pensions of seniors and repeal reimbursement for Medicare Part B payments to retirees. While personally opposing a jump in the GET, he said a majority of his colleagues wanted to at least discuss the idea.

RGA tv ad attack Ige on GET

Screen shot from a recent Republican Governors Association television attack on Sen. David Ige.

RGA

The proposal was eventually shot down by Ige’s fellow Senate Democrats. Now it’s fresh fodder in the general election campaign for governor, which pits Ige against Republican Duke Aiona, the former lieutenant governor.

With Ige holding a narrow lead over Aiona, the attacks could pay off.

What the GOP Says

Hawaii does not have a sales tax. Its big revenue-generator is the GET, a 4 percent tax on most business receipts.

Unlike a sales tax, the GET is levied on the seller and not the purchaser. But businesses pass that expense on to customers, so it is effectively a tax on nearly everyone in Hawaii in one way or another.

“David Ige’s policies would lead Hawaii the wrong direction. His penchant for hiking taxes is putting paradise out of reach for more and more Hawaiians.” — Stacey Day, Republican Governors Association

While raising the GET is periodically proposed at the Legislature, especially in tough economic times, most lawmakers are loath to touch it because it is already so expensive to live here.

The GOP knows this, of course, and is seeking to exploit what happened with Ige and the GET proposal three years ago.

Ted Kwong, a communications advisor for the Hawaii Republican Party, has sent out numerous email blasts assailing Ige on the bill, stating that “he did so with full knowledge that it was already one of the most onerous tax burdens Hawaii families face. It was no surprise when taxpayers, small businesses and even members of his own party protested en masse and rejected his massive tax hike proposal.”

Much the same charge has been made by Aiona in debates and candidate forums with Ige and Hawaii Independent Party candidate Mufi Hannemann. Aiona, for example, brought the GET bill up in a forum before the Chamber of Commerce of Hawaii on Sept. 23.

After the forum, Aiona’s campaign sent out a press release trumpeting his performance:

Time and time again Aiona repeated support for stronger business, especially small businesses that make up a majority of Hawai’i and keep a majority of monies locally. That’s just one of Aiona’s initiatives in overcoming the state’s overwhelming cost of living and status quo. A status quo that would continue with David Ige, who despite denying it in tonight’s debate, did vote for an across-the-board General Excise Tax (GET) increase in 2011.

Just last week, the Republican Governors Association, through a related group called the American Comeback Committee, launched a television commercial that brings the assault on Ige’s proposed GET increase into Hawaii living rooms.

“David Ige’s policies would lead Hawaii the wrong direction. His penchant for hiking taxes is putting paradise out of reach for more and more Hawaiians,” said Stacy Day, a spokeswoman for the group, in a press release announcing the new spot.

The RGA and the Hawaii GOP are not allowed to coordinate on paid advertising. But the two groups are singing from the same hymnal when it comes to Ige and taxes.

Kwong believes the GET bill is fair game, saying it would have increased expenses on items like groceries, clothing and medicine.

“If Sen. Ige had had his way, the bill would have passed out of committee and then ended up on the (Senate) floor and probably arrived on the governor’s desk to be signed into law,” Kwong told Civil Beat. “It took a revolt from his own party to kill this tax hike that would have affected everything.”

What David Ige Says

Ige remembers things differently. That year was his first as Ways and Means chairman, and it was the first budget proposed by the new governor, Abercrombie.

“Before the session started, the Council on Revenues met, and their forecast — and the deficit we were looking at in the budget — was something on the order of $200 million,” Ige told Civil Beat. “By the time the Council met in January and gave us a new forecast, that deficit had grown to four, five, six hundred million dollars. And when the House passed the budget to the Senate back in March, that deficit had grown to $1.2 billion.”

Given that the state’s general fund budget is from $4 billion to $5 billion, Ige said a $1.2 billion deficit was significant.

“So, you have to be prepared to balance the budget,” he said. “Our constitution requires that we pass a financial plan that has sufficient revenues to cover the expenditures. And so we were looking at all options.”

Ige said the governor’s proposal to generate revenue was to tax pensions and to repeal the reimbursement for Medicare Part B to retirees. But that would generate only about $600 million, said Ige, and Abercrombie’s budget reductions were insignificant — about $300 million. Ige said he also did not want to burden seniors.

Gubernatorial candidate Sen. David Ige during an Editorial Board meeting at the Civil Beat offices on October 1, 2014

Gubernatorial candidate Sen. David Ige during an editorial board meeting at the Civil Beat offices on Oct. 1.

PF Bentley/Civil Beat

“So, as chair of Ways and Means, I do have a responsibility to look at options for revenue increases and look at options for cutting the budget,” said Ige.

The senator said the idea to increase the GET by 1 percent for two years came from Senate colleagues. Given that the total revenue from the GET in fiscal year 2014 was $2.8 billion,  a 1 percent increase would bring in a lot of cash to state coffers.

Ige told Civil Beat he personally opposed the idea but sought to move it forward in his committee. He said the request for a hearing came from “a majority of members.” But Ige did not take a headcount, and it turned out that he did not have the necessary votes. The measure died.

“It is obvious to me that it is a tactic they use all the time to take these votes out of context and paint a picture that’s not accurate.” — Sen. David Ige

Ige does not deny that he himself voted to move the GET bill out of committee.

“I did vote to move it out, but of course — I’m the chair of the committee, right?” he said. “Most people would say, ‘I’m just not going to hear it. I’m not going to deal with it. I’m going to shut it down, irrespective of what the feeling of the organization is.’ That’s not me. I’m about collaboration. I’m about giving everybody the opportunity.”

Ige is not surprised by the GOP blitz against him.

I understand how that game is played. I understand that that’s the way politics is played on the mainland,” he said. “I learned a long time ago that you don’t take anything personal. They’re going to do what they’re going to do.”

Ige continued: “It is obvious to me that it is a tactic they use all the time to take these votes out of context and paint a picture that’s not accurate.”

Kwong is from California and was sent to help Hawaii Republicans as an independent contractor. A former member of the Republican National Committee in 2012, Kwong was a war room intern for the John McCain presidential campaign in 2008. Kwong said he has never worked for the RGA, but said an RGA headhunter recommended him to the Hawaii GOP.

What the Media Says

The GET increase got a lot of attention in 2011. Four media reports at the top suggest that Ige was far from eager to raise the tax, but he was worried about cuts to programs and did try and pass the measure out of committee.

The Honolulu Star-Advertiser reported that the Ways and Means rejection of Ige’s recommendation to move on the legislation was “unusual,” saying that it “is rare for rank-and-file senators not to follow a chairman.”

But the newspaper said Ige’s decision to vote against the amended bill was also unusual, because “if Ige votes against the bill when it reaches the Senate floor, it could mean he will not be appointed to the conference committee with the House on the bill.”

Hawaii Reporter wrote that the bill would have “generated up to $600 million by taxing goods and services at every level of transaction. Another portion of the bill, which eliminates General Excise tax exemptions for a number of Hawaii businesses, including Hawaiian Airlines, Matson and general contractors, is moving forward.”

Hawaii Reporter called the vote against Ige “a dramatic and unusual twist,” and it said the effort to kill the measure came from Sen. Donovan Dela Cruz.

“He said he received hundreds if not thousands of calls, emails and faxes from his constituents, largely in opposition,” according to the report.

KITV, meanwhile, interviewed Helen Carroll, a Realtor, who was “delighted” that the GET bill died. Bob Nakata, a human services advocate, said he was extremely frustrated with the “no” vote, because he worried about cuts to vital services. And AARP head Barbara Kim Stanton said she was worried about that the alternative would be “a money grab of the pensioners.”

Ige himself told KITV that education, health and welfare “now face serious cutbacks.” But the senator said he did not plan to bring up gambling or diverting the transit tax to generate revenue, because neither idea had survived committee votes.

Finally, Civil Beat reported that Ige was “blindsided” by the abrupt changes in support for the legislation. That included Senate President Shan Tsutsui along with Sens. Brickwood Galuteria and Les Ihara walking into the Ways and Means Committee room to watch the vote, showing leadership’s solidarity with senators voting “no.”

Afterwards, Ige stood by his position that something needed to be done to find more money.

“Nobody’s budget balances at this point in time,” Ige told reporters. “So at the end of the day, we’ll have to either come up with revenues or cut the budget.”

Ultimately, the Senate, House and governor agreed on the temporary suspension of business-to-business tax exemptions to solve the revenue shortfall.

RGA attack ad on Ige 2014

Screen shot from the RGA TV attack on Sen. Ige.

RGA

Ige feels the same nearly four years later.

“I did vote to pass it out of committee. The committee voted it down,” he said. “If you were to ask me what my personal position was, I was against (the increase). But as chairman of the committee, I had a responsibility to balance the budget, and we needed to have all options on the table.”

Ige also said there was no guarantee that the tax hike would have survived the session.

“There are a lot of things that we move through the process so that we can keep the dialogue going,” he said. “At the end of the day, the final vote is the final vote.”

While the GET was not raised that year, Aiona’s former boss, Linda Lingle, in 2005 allowed a bill to become law that permits Hawaii counties to increase the GET from 4 percent to 4.5 percent for transportation projects. Lingle wanted to veto the measure, but was persuaded in no small part by Hannemann, who was mayor of Honolulu at the time and the leading proponent for a rail project.

The Honolulu City Council later passed the GET increase for Oahu, and Hannemann signed the bill into law. The increase went into effect in 2007 and is supposed to expire in 2022 — by which time either Ige, Hannemann or Aiona might very well be finishing their final year as governor.

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