HONOLULU -- State lawmakers have agreed to give the counties the option to hike Hawaii's excise tax from 4 percent to 4.5 percent to pay for transportation needs.

For Oahu, that means a new transit system.

Raising the tax 0.5 percent translates into a 12.5 percent increase in the excise tax. Critics say it could cost the average family about $450 extra in taxes a year when you consider how the excise tax is passed on to consumers at each step.

Honolulu Mayor Mufi Hannemann said he is eager to impose the excise tax hike on Oahu taxpayers to get a rail-transit system up and running to ease the stifling traffic.

Lawmakers said a financial commitment from the state is needed now to get 50 percent expected federal funding.

"We have been advised that might be very difficult if we don't pass it now, because our past history in getting the rail has not been good. And the feds are very wary of us. And so, they have put some conditions on it," House Transportation Chairman Rep. Joe Souki said.

Critics said the impact of the excise tax hike will be huge.

"It is going to raise the cost of living for all the people here in Hawaii, not just Oahu people, but for everybody since the excise tax is so pervasive," Hawaii Tax Foundation Director Lowell Kalapa said. "It will make it through the entire fabric of our economy and it will cause people to think twice about the cost of living here."

The proposal allows the counties the option to hike the excise tax from 4 percent to 4.5 percent. The counties must decide by Dec. 31 if they will impose the tax hike. The tax hike would expire in 15 years.

The full Legislature is expected next week to approve the option for a transit tax hike.