Tax Watch: Tweaking the general excise tax
In the 2011 Hawaii Legislative Session, there are numerous, confusing proposals to increase, decrease, exempt, and fine-tune the General Excise Tax (GET). The GET is the tax we pay on goods and services at every level of production, from wholesale to retail, including taxes on the taxes we pay.
Here’s a quick run-down of proposed bills that affect the GET (let me know if I missed anything):
NEW General Excise Taxes have been proposed for hospitals, infirmaries, and sanitaria (HB178); income from a life settlement, bank-owned life, or corporate-owned life insurance policy issued after 6/30/11 (HB798); and a host of currently exempt organizations – see Part III, including service and facility providers for the homeless, public service companies, public utilities, fraternal benefit societies/associations, and more (SB1532).
General Excise Tax EXEMPTIONS have been proposed for fuel sold from a foreign-trade zone to common carriers for use in interisland air transportation (HB123); local agricultural products (HB286); transactions between a common paymaster and related persons (HB848 and SB1107); federally tax exempt companies that supply potable water (HB911); food and medical services (SB269); intermediary business transactions (SB849); fundraising activities by charitable organizations (SB850 and SB853); and food (SB852).
General Excise Tax SURCHARGES have been proposed for country water infrastructure at 0.5% (HB460); and commercial activity that utilizes the State’s ocean resources at 1% (HB698).
General Excise Tax INCREASES have been proposed at an additional 0.5% (HB567); and an additional 1% for five years (HB1631).
The Legislature also offers some CREATIVE General Excise Tax proposals, like a five-year exemption for qualified small business manufacturers (HB183); an annual exemption for qualified school supplies, computer supplies, clothing, and books “beginning on Wednesday of the last full week of July and ending in 5 days on the following Sunday” (HB364 and SB755); a four-year reduction in the General Excise Tax rate to 1% (HB799); a repeal of the 0.5% Honolulu transit surcharge offset by a 5% casino gambling tax (HB1536); and tax holidays for 3 days during each of four specified weekends in March, June, September, and December (SB851).
These ideas may be helpful (or not), and save us money (or not), but they make the tax code even more complicated and confusing for everyone.
Instead of trying to tweak it, let’s repeal the Hawaii GET entirely – and replace it with a reasonable state sales tax on retail-level goods and services, excluding food, drugs, and medical services. That makes a lot of sense to me, and it would benefit everyone.
Please contact your elected representatives by mail, email, or phone, and tell them that we can’t afford the GET we have, much less confusing changes to the GET tax code. Contact your representatives in the House and Senate.