Lawmakers pushing ahead with oil tax increase

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HONOLULU — Legislators, seeking ways to finance alternative energy projects as government revenues decline and state budget woes continue, have settled on raising the per barrel tax on petroleum products sold by distributors.

HONOLULU — Legislators, seeking ways to finance alternative energy projects as government revenues decline and state budget woes continue, have settled on raising the per barrel tax on petroleum products sold by distributors. The per barrel increase from 5 cents to $1.05 would generate $31 million for alternative energy projects and food safety programs, and could cost consumers 2 to 3 cents more per gallon of gasoline. "It’s a tax that really could be called an investment and viewed as an economic stimulus for us because it puts money where we need it most, in our energy and food infrastructure," said Rep. Hermina Morita, D-Hanalei-Kapaa. "One of our biggest problems right now, especially in a down economy and with the general fund, is that both food and energy are long-term strategies to lessen our dependence on imports. In order to make this kind of transformation, we need dedicated funding." But the tax hike faces opposition from Gov. Linda Lingle because it would be passed on to consumers during a recession. Her administration has also questioned the need for a task force the measure would create to oversee the tax revenues because there is already consensus that the state has to move toward alternative energy. Linda Smith, the governor’s senior policy adviser, told lawmakers in testimony last month that the administration "opposes any measure that increases the cost of living for Hawaii residents." The measure was approved late Friday night by a House-Senate conference committee and must be passed by both houses before the Legislature adjourns later this week. The current per-barrel "environmental response tax" was established in 1993 and applies to petroleum products sold by distributors to retail dealers and end users other than refiners. The receipts can be used by the state for oil-spill prevention, county used-oil recycling programs and energy security. The money can also be directed toward environmental protection, including issues related to air and water quality and global warming. But the legislation would hike the tax and expand the scope of the uses of the revenues. In testimony to legislators, the Tax Foundation of Hawaii said there was a nexus between oil importers and the possibility of oil spills that may have justified the initial tax. But under the bill, that nexus appears weaker, the foundation contended. Still, several business and environmental interests have urged lawmakers to pass the bill. "I am so proud of our legislators," said Pono Shim, vice president of Enterprise Honolulu, also known as the Oahu Economic Development Board. "This is Hawaii’s economic stimulus. That’s what we see. "There are companies and we can’t mention them that are in the queue right now that have wanted to come into Hawaii. What this is is a response from Hawaii that says, ‘We’re ready.’ " Robert Harris, director of the Sierra Club’s Hawaii chapter, said, "It’s the idea of taxing your problem in order to create money for our solution. It seems like an ingenious way of proceeding." The bill also would direct some tax proceeds to programs that help protect local agriculture by, for example, providing money to contain threats such as varroa mites, which attack honey bees. ______ Copyright 2009 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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