The dramatic final week of the state legislative session wound down yesterday with Democratic lawmakers following through on a promise to override Gov. Linda Lingle's vetoes of four measures that will increase taxes to balance the state budget.

Hawai'i now has the highest income tax rate for top bracket earners in the country, and visitors paying $200 a night for a hotel room will pay an additional $4 in taxes by 2011.

Leveraging their overwhelming majority in the state Senate and House of Representatives, Democratic legislators increased state income taxes on the wealthy, the hotel-room tax, the conveyance tax on the sale of luxury and second homes, and a tax on tobacco products, such as chewing tobacco, pipe tobacco and cigars.

"Contrary to what the governor says, she has not given us options," said state Senate President Colleen Hanabusa, D-21st (Nanakuli, Makaha), speaking after the Senate session yesterday.

"Her option is to basically tell us 'trust me,' and I can fill a $300 million puka in the budget with collective bargaining (concessions) without laying off people. The problem, of course, is that we have an obligation to balance the budget and we can't balance it on a promise to do something," said Hanabusa. "What we wanted to do was protect the working people and the middle class as best we could."

LINGLE'S VETOES

Standing before hundreds of people massed in the state capitol rotunda Thursday, Lingle vetoed the tax increases, saying they would discourage investment, hurt small-business owners and hamper the visitor industry at a time when it is struggling. She urged residents to contact their lawmakers and ask them not to override her vetoes.

Yesterday, speaking to reporters at the Capitol, Lingle said Democratic lawmakers "went back to what they know best" by raising taxes. It will now be a "very steep climb" for the state to get out of the current fiscal crisis as new revenue projections due May 25 are not expected to be positive.

"The tax increases the Legislature passed is going to make our economic recovery more difficult and will result in more job losses in our state," said Lingle. "It's going to be a challenging couple of years ahead."

On Thursday, the state House and Senate gave final approval to a two-year state budget that contains $800 million in general-fund spending cuts and the elimination of 200 mostly vacant state jobs.

Lawmakers could not have balanced the budget without $942 million in federal stimulus money approved by President Obama and Congress and the roughly $250 million in tax increases.

Over the past year, because of the recession, state revenues have fallen by more than $2 billion, forcing both Lingle and lawmakers to make substantial spending cuts.

Lingle insists that lawmakers could have balanced the budget without the tax increases. She proposed furloughs of state workers and adjustments to healthcare benefits.

"There are tough choices to be made, but we could have made them during our budget process so we wouldn't have to raise taxes," said state Senate Minority Leader Fred Hemmings, R-25th (Kailua, Waimanalo, Hawai'i Kai). "How much sacrifice has been given by government labor unions? I challenge you, stand up and tell me what sacrifice that special-interest group has made. Everyone else in the state (private and public) ... is taking a hit."

'IT'S THEIR LIFE'

As the House closed its doors yesterday, state House Speaker Rep. Calvin Say, D-20th (St. Louis Heights, Palolo Valley, Wilhelmina Rise), urged lawmakers to go out into the community and take the pulse of constituents because seven months from now, the Legislature will be back at it again.

"Our journey has just begun," Say said. "The bills we overrode today were there to stabilize the economy in the long run. I'm proud of the accomplishments of the House."

Lawmakers wrestled with their consciences yesterday, said House Minority Leader Blake Oshiro, D-33rd ('Aiea, Halawa Valley, 'Aiea Heights). They had to weigh the impacts of tax increases with the constitutional necessity of balancing the budget while not cutting important programs.

"We had little or no other alternative," said Oshiro, immediately after the House adjourned for the year.

Of the four measures up for vote yesterday, the one receiving the bulk of the discussion was the 1 percent increase to the transient accommodations, or hotel-room, tax.

"We cannot take our industry for granted," said Rep. Gene Ward, R-17th (Kalama Valley, Queen's Gate, Hawai'i Kai).

Rep. Kymberly Pine, R-43rd ('Ewa Beach, Iroquois Point, Pu'uloa), argued that raising the tax a percentage point will affect visitors coming to Hawai'i on vacation.

"I am very emotional about this bill," Pine said. "The hotel workers are very concerned because they saw a decline in business when gas prices were soaring. It isn't just a question of money, it's their life."

AFFECTED TAXES

Starting July 1: