There were plenty of laughs in Gov. Neil Abercrombie’s maiden State of the State speech Monday, but the subtext was plenty grim.
Abercrombie made it clear that the state is in a rocky financial position, facing a budget deficit creeping toward $900 million. Since – to use a well-oiled phrase – the “low hanging fruit” of likely budget cuts have already been made, the expectation was that Abercrombie would have to propose tax increases.
And so he did. The business community can rest easy, at least temporarily. He did not propose any new taxes that directly impact business – a promise he made during the campaign.
Instead, Abercrombie stepped boldly, if not dangerously, into a political buzzsaw by proposing tax increases for some of the state’s most politically powerful constituencies – government employees and retirees.
- Eliminate the state’s reimbursement for federal Part B Medicaid benefits for Hawaii government employees.
- Eliminate the deduction used by state taxpayers for state taxes paid the previous year.
- Begin taxing pension income.
Abercrombie can claim a little high ground by pointing out that he is of an age and background that enjoys such benefits. So he is not asking anyone to take a hit he is not willing to take for himself. But still, these proposals, while sensible on a theoretical level, are politically radioactive.
And if you are not among the constituent groups targeted by any of the above, don’t worry. Uncle Neil would pluck at your pocket with higher taxes on alcohol and soft drinks.