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An Open Letter to the Hawaii Legislature: No Tax Hike for Light Rail!

March 8, 2005

Dear Legislator:

On behalf of the more than 1,700 members of the National Taxpayers Union (NTU) in Hawaii, I write to urge you to oppose any effort to raise taxes to pay for a costly light rail system. Senate Bill 1366 is now making its way through the Hawaii Legislature. This bill would raise the excise tax rate on goods and services from 4 percent to 5 percent (a 25 percent increase) to pay for light rail in Honolulu and a few transit projects elsewhere. Although supporters of the legislation are touting "tax relief" as part of the package, at least two- thirds of the $320-$350 million in additional taxes collected under this proposal would be allocated to government spending, not tax relief.

Raising taxes for transit is bad news for Hawaii's economy. Residents already face the fourth-highest state and local government tax burden in the nation and this burden will only grow heavier if the state excise tax is raised to fund light rail. Perhaps even more harmful than the immediate impact of higher taxes is that by saddling taxpayers with the costs of constructing and maintaining a new government transportation boondoggle, the Legislature is setting taxpayers up for even heavier tax burdens into the future.

Worse than lack of use is the fact that public provision of light-rail services will require massive subsidies. For example, fare revenue covers only 28.2 percent of operating costs in St. Louis, 19.4 percent of costs in Baltimore, and 21.4 percent of costs in Buffalo. Nationwide, annual light-rail operating costs ($778.3 million) far exceed fare revenue ($226.1 million); the balance ($552.2 million) is paid for with tax dollars. Note that these numbers refer only to operating expenses. With such large annual losses, no light-rail system could possibly recoup its construction costs, which can amount to several hundred million dollars.

Don't be fooled by the empty promises rail backers have made of easy commutes and reduced traffic in Honolulu. Only the restoration of free market forces and private investment in infrastructure projects can help Honolulu and other cities throughout the state break through their gridlock. Given their massive costs and inability to carry large numbers of people, light rail systems would never be built by private industry on its own, so please do not put taxpayers on the hook for this massive boondoggle. If you would like ideas on ways to reduce road congestion in a more taxpayer-friendly manner, please do not hesitate to contact me.


Paul J. Gessing
Director of Government Affairs