Hawaii Legislative Watch: Taxes

The 2013 Hawaii Legislative Session started on January 16. There are 1,484 bills proposed in the House of Representatives and 1,388 bills proposed in the Senate (as of January 27, a few days past Bill Cut-off). That’s a lot of proposed changes, improvements, and expenditures, but there are actually 2,391 fewer bills proposed this year than in the 2012 legislative session!

Over the past few weeks, I’ve skimmed through the list of House and Senate bills, relying on the measure summaries to tell me the true intents of the bills.

I’ve divided the proposed legislation into 7 broad categories: taxes, education, people vs. government, up for debate, law on our side, Native Hawaiian issues, and trivial pursuits.

Here are the tax highlights from the 2013 Legislative Session. There are many more tax proposals, some of them hidden and many of them confusing. Some bills, like SB360 are tricky – lowering some taxes while raising others. If I’ve missed any important tax bills, please let me know!

The good: There are 10 proposals that attempt to lower our taxes.

1. No general excise taxes (GET) on food and medicine: HB16 exempts food grown in the state from the GET. SB257 exempts food from the GET. SB788 exempts food and medical services from the GET. SB335 exempts food and over-the-counter drugs from the GET. Food and medicine are basic necessities; this would especially help low-income families.

2. GET on retail transactions only: SB268 repeals the GET on all intermediary business transactions, such as wholesale or re-sale transactions. This would eliminate double taxation and mean less paperwork for businesses!

3. General excise tax holiday: SB249 proposes a general excise tax holiday if retail businesses pass the savings on to consumers. This would encourage spending, especially on big-ticket items.

4. Repeal the mass transit county surcharge: SB275 discontinues the county surcharge on state tax for mass transit. Unexpended moneys must be returned to the state.

5. Lower income taxes: HB694 lowers income taxes, by repealing the temporary increase in income tax rates. HB384 creates a tax credit for low-income persons who fall below federal poverty guidelines. SB360 doubles the standard deduction amounts, the tax credit for household and dependent care services, the income tax credit for low-income household renters, and the refundable food/excise tax credit.

6. Lower taxes for farmers: HB503, SB816, and SB1381 provide a GET exemption on farm fresh produce consumed within Hawaii. SB363 creates an income tax exemption on the first $50,000 of income for family farms.

7. GET exemptions for used vehicles: HB1286 and SB352 exempt used, currently-registered motor vehicles from the GET. This is common-sense – someone paid the GET when the car was new.

8. Lower vehicle registration fees: SB334 reduces the state motor vehicle registration fee from $45 to $38 on 7/1/2013 and $31 on 7/1/2014. SB634 reduces the annual state vehicle weight tax for certain hybrid and electric vehicles by 10%. I’m on the fence about this one – we need to maintain our roads.

9. Encouraging charitable giving: HB860, HB1053, and SB462 remove itemized deduction limits for charitable giving. SB247 and SB786 exempt the GET for fundraising activities by charitable organizations.

10. Tax credits for businesses that relocate to Hawaii: HB553 offers tax credits for businesses that expand or locate their operations in Hawaii and increase employment.

The bad: There are 12 new or higher tax proposals that will take more money from our wallets:

1. Increase the general excise tax (GET): HB149 increases the GET from 4% to 4.5%. SB191 increases the GET from 4% to 5% for two years to fund the acquisition and management of agricultural lands. HB1368 and SB604 increase the GET from 4% to 5% to fund education. SB360 increases the GET from 4% to 5%. SB359 authorizes counties to impose a 1% surcharge on the GET. SB335 authorizes counties to impose a surcharge on the GET. I am opposed to any increase to the GET, because it is an unfair system that taxes every level of production, from wholesale to retail, and forces businesses to pay taxes on the taxes they collect!

2. Tax on Internet sales: SB948 allows Hawaii to implement the Streamlined Sales and Use Tax Agreement to tax Internet sales. I am opposed to taxes on Internet transactions that occur in a state where the company does not have a location. This proposed bill would generate confusion and more paperwork for businesses and higher costs for Hawaii residents. More companies might refuse to ship to Hawaii.

3. Expands the GET: HB1257 and SB1335 expand the application of the GET to “business activities in the State that are significantly associated with a seller’s ability to establish or maintain a market in the State.” I’m not sure exactly what this means.

4. Tax on plastic bags and styrofoam: HB356, HB357, SB13 and SB14 add a 10¢ tax on single-use checkout bags, with businesses retaining 1¢ of the tax (subject to income and general excise taxes for the first year). HB934 and SB1165 establish a fee for single-use checkout bags. SB621 adds a 10¢ tax for foam disposable food containers. My ten cents: I think that plastic bags and styrofoam should be a business and consumer decision; I am skeptical that eliminating plastic bags will really help the environment; and I am outraged that businesses would be paying tax on the tax!

5. Higher sewer taxes: SB1132 increases the solid waste management surcharges for solid waste disposed of in landfills, shipped out of state, or disposed of at waste-to-energy facilities. Is this a legitimate increase?

6. Higher taxes on real estate: HB935 and SB1166 increase the Conveyance Tax on certain real estate transactions to pay for watershed protection and invasive species control. This tax is unfair.

7. Tax on soda (sugar-sweetened beverages): HB854 and SB1085 add a fee on sugar-sweetened beverages. SB646 takes it further by creating a tax on sugar-sweetened beverages, syrup, and powder. My ten cents: the choice to produce and drink soda is a business and consumer/parental decision; I question whether soda is really the main contributor to obesity (what about diet soda?); and this seems to be a test-case for even more taxes on what we eat (are cookies, chips, and plate lunches next?).

8. Higher gas taxes: HB988 increases the environmental response, energy, and food security tax by at least 2¢ to support native wildlife.

9. Higher vehicle registration fees: HB892 and SB1123 increase the state vehicle registration fee by $1.

10. Higher taxes on tires: HB375, HB441, SB63 and SB569 add a $1 motor vehicle tire surcharge.

11. Higher tobacco and liquor taxes: HB657 and SB492 impose a tax of $3.20 per net ounce of tobacco to fund cancer research. SB645 increase liquor taxes to fund community health centers and the trauma system. On the good side, SB1261 reduces the liquor tax to 23¢ per gallon on the first 60,000 barrels of beer brewed or produced by a small Hawaii brewery. Government excessively taxes alcohol and tobacco use, just because they can.

12. Higher hotel taxes: HB971 and SB1202 raise the transient accommodations tax to 11.25%, by eliminating the sunset of the lower 9.25% rate. On the good side, SB1222 would exempt Hawaii state residents from the transient accommodations tax. We should have a lower “accommodations” tax to encourage visitors to say longer, since they’ve already made such a big effort just to get here. Yes, visitors use city and state services; but they also pay the GET on everything they buy.

Please think about these tax issues and how they may affect you and everyone around you. If you feel strongly about an issue, speak out! Talk to your family and friends, let your Hawaii legislators know about it, and write letters to the local newspapers.

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