Governor Abercrombie signed Act 105 (SB 754) a month ago (June 14) and the law, which became effective July 1, is causing major economic disturbances in Hawaii as predicted.
The bill was a key component in the Governor’s 2011 plan to increase tax revenues to try and meet the $1.3 billion two-year (FY 12, FY 13) budget deficit. The estimated taxes generated by this one measure are more than $400 million over the two years.
This one bill, by “temporarily” suspending long-practiced exemptions from the State’s regressive and pyramiding gross income general excise (not sales) tax has added to cost burdens for business and individuals.
Proponents of the bill described it as an “equity” measure that would end tax loopholes and bring in needed revenues. It was also heralded as “temporary” for two years only. Do you remember the last “temporary” Hawaii tax?
We opponents of this bill explained this was not a loophole but an attempt to balance out double taxation in the GET. We warned that the law would have far-reaching negative economic implications, unintended consequences and a new and heftier cost burden on Island residents.
All of this has come true since July 1 including higher airline costs, added shipping surcharges (Matson added $52 per container just for this law), new costs for sub contractors and sub lessees.
However, the second shoe had fallen. Other issues—unintended—began to surface last week as AOAO condo associations began to notify owners that previously tax-excluded utility, maintenance and other separated cost items would now be subject to the 4.5% GET on Oahu. Non-profits are also adversely burdened. Other transfer entities have also been informed of new tax costs.
Calls to the State Department of Taxation for clarification have resulted in mixed but generally unsatisfactory responses. Calls to individual legislative offices have also resulted in confusion.
Why? Because the law is confusing and not fully transparent.
The history of the law needs to be disclosed also. Especially, since lawmakers such as myself supported the original bill and now are being criticized for supporting the new law (we don’t).
SB 754 was introduced on January 21 this year by Senators Carol Fukunaga,Suzanne Chun Oakland and Rosalyn Baker. Four other Senators, including myself, signed on to the bill. SB 754 was a Small Business Caucus package bill that, “Amends distribution of partial payment of taxes to principal first, then penalties, then interest.” A good bill. A necessary bill.
The small business reform bill passed the Senate WAM Committee with amendments unanimously, and the full Senate 24-0 (Shimabukuro was excused) on March 8. It went to the House.
On April 4, the House Finance Committee amended the bill further.
By now, the bill’s contents had been “ gutted and replaced” with the tax increase in place.
On April 29, the new bill, SB 754,SD1, HD1, CD1 emerged from Conference Committee.
The public was just beginning to understand the full impact of this bill. There was bipartisan pushback from the final version of the bill.
Final “No” votes in the House (5/3/2011) were: Brower, Ching, Cullen, Fontaine, Har, Johanson, Marumoto, Riviere, Thielen and Ward. (Carroll and Pine were excused).
Final “No” votes in the Senate (5/3/2011) were: Baker, Chun Oakland, Espero, Fukunaga, Green, Ihara, Slom and Wakai.
Now the bill is law and the consequences continue to emerge. My office will inform the public on any further tax decisions.
In the meantime, the senate Minority’s Budget Chief, Arik Look, has prepared this summary with additional information.
Senator Slom talks about the State Budget bill (HB 200) during the April 12 bill crossover voting session. Senator Slom voted against the State Budget because it proposed more spending and more taxes. Senator Slom always votes against tax increases.
The Senate Ways & Means Committee struck out the section pertaining to the 25% General Excise Tax hike yesterday (April 7). The motion to amend HB 793 and take out the tax increase passed in a rare motion where members of the committee voted against the recommendation of the the committee chairman. The bill still retains other components that make it less than perfect, which Senator Slom voted against.
The bill description for the SD 1 now reads “Suspends from 1/1/2012, to 6/30/2015, the exemptions for certain persons and certain amounts of gross income or proceeds from the general excise and use tax and requires the payment of the tax at a rate of 4%. Appropriates funds to expedite implementation. ” You can get the full text of the bill from this link.
Testimony against the GE tax increase was plentiful. Some examples of testimony submitted against the tax increase included:
“The legislative branch should be working toward reducing spending through elimination of redundant services or de-funding programs which are nice to have but not necessary to operate an effective government… I dare you to take a stand against over expenditure and eliminate unnecessary programs or excessive government agencies. I am not asking you to do the impossible but I am expecting you to do the difficult. Do your job.”
- Marc Grandmaison
“You have a SPENDING problem, not an INCOME problem.”
-David Verret
“Why raising taxes is always the first thing the legislature thinks of as the solution is not fiscally responsible. You are very very close to the tipping point on what individuals and small business can handle… CUT THE SPENDING.”
- Adrienne King
“In tough economic times, everyone tightens up and eliminates unneeded or wasteful expenses. That is, everyone EXCEPT the government. Instead the government continues to spend and increase spending, all on the backs of the hard-working, taxpaying Hawaii residents. This trend needs to stop immediately.”
The GE tax increase could resurface again during the conference committee process despite legislators saying that the proposal is off the table for now.
Photo: Senate Ways & Means Committee hearing on April 7.
Senator Slom's first weekly press conference 2-1-11
State Senator Sam Slom held the first of his weekly press conferences in his office on Tuesday, Feb. 1 where he discussed several issues with members of the media. Among the current issues now being debated in the legislature are but not limited to the following: Emergency budget appropriations, a special fund for the Lt. Governor’s office, the streamline tax, information privacy, vehicle rental surcharge taxes, “Death With Dignity”, banning and closing down the aquarium fish industry, restriction of eminent domain powers for public use and extracurricular activity opportunities for home schooled children. The Senator will be holding another press conference tomorrow (Feb. 8 ) at his office in State Capitol Room 214 starting at 9:00 am.
JUDGE SABRINA McKENNA
Circuit Court Judge Sabrina McKenna‘s nomination to the Hawaii State Supreme Court was passed out of the Senate Judiciary Committee by a unanimous 5 – 0 margin. Senator Slom voted with the majority citing her experience as one of the reasons why he voted in the affirmative. Judge McKenna nomination will now be taken up by the full Senate in a floor vote that will likely occur as early as this week.
GOVERNORS’ APPOINTEES
Several of the governor’s nominees are up for vote or hearings this week. Among them are Transportation Director nominee Glenn Okimoto (GM 516) whose nomination goes before a full vote in the Senate today, as well as Dept. of Hawaiian Home Director designate, Albert “Alapaki” Nahele-a. Later this week the Senate Agriculture committee will be taking up the nomination of former State Senator Russell Kokobun (GM 504) at 2:45 pm on February 10. The Senate Water, Land and Housing Committee will hold a hearing on the nomination of William Aila (GM 517) to the Dept. of Land and Natural Resources at 1:15 pm on February 12.
DEATH WITH DIGNITY BILL
A new physician assisted suicide bill will be heard today in the State Senate Health Committee. The so called “death with dignity” bill (SB 803) gets its public hearing in the Capitol auditorium starting at 2:45 pm today (Feb. 7). This bill will allow a terminally ill, competent adult to receive medication to end life. Doctors would prescribe the medication. Senator Slom has opposed physician assisted suicide for years and will vote against the passage of this bill.
STREAMLINE TAX BILL
Many bills to increase taxes are on tap. Today (February 7) the internet “streamline tax” bill will be heard in the Senate Economic Development and Technology committee starting at 1:15 pm. If this bill is approved, Hawaii will join other states in the taxation of internet transactions such as purchases from popular websites like Amazon.com. Senator Slom opposes all bills that create new taxes or increase current taxes.
SENATOR SLOM’S BILLS
Three of Senator Slom’s bills get hearings this week.
First up is SB 878, designating the Hawaiian Hoary Bat as the official State Land Mammal. That bill will be heard in the Senate Hawaiian Affairs committee starting at 3:15 pm today, Room 224. There is a website set up for information on this bill and the Hawaiian Hoary Bat.
The Senate Education Committee will hear SB 871 which will allow home schooled students to participate on an equal basis in extracurricular activities offered at the public school they would otherwise be required to attend. The hearing is scheduled for Friday, February 11 in State Capitol Room 225 starting at 1:15 pm.
The Senate Public Safety and Government Operations Committee will hold a hearing for SB 1147 on Saturday February 12 starting at 9:00 am in State Capitol Room 229. The bill will restrict eminent domain powers of the counties to ensure that private property, if acquired by a county through its eminent domain powers, is acquired only for public uses and not for private use.
On Friday, January 21, 2011, Senator Sam Slom, the Senate Minority leader filed the Minority bill package with the Senate Clerk. This package of bills reinforces Senator Slom’s remarks on the Opening Day of the Legislature. Specifically, Senator Slom noted that the State budget should be the Legislature’s most pressing issue, and he further noted that without systemic changes, Hawaii’s economy cannot be improved. Accordingly, he introduced a measure that would require bills that make appropriations or otherwise contain money provisions to include a fiscal impact statement.
The Minority package also proposes amendments to the Hawaii constitution to allow for initiative, referendum, and recall, and to impose term limits for state legislators. These measures would restore political power to the people.
Senator Slom stated on Opening Day that Hawaii suffers due to unfunded federal mandates, which are draining the Treasury and diminishing the State’s 10th Amendment sovereignty rights. To remedy this, he has introduced a bill to require the Hawaii Attorney General to investigate and take appropriate legal action against unconstitutional federal laws and mandates.
Senator Slom’s bills present an opportunity to “right-size” government in Hawaii, and to create positive changes. The Minority package bills for 2011 include:
1. SB 268 requires a fiscal impact statement for any proposed legislation that includes an appropriation or which will result in significant future fiscal changes for the State.
2. SB269 exempts food and medical services from the general excise tax.
3. SB 270 revises medical tort reform laws.
4. SB 271 repeals the requirement for gasoline to contain 10% ethanol.
5. SB 272 amends State constitution to provide initiative, referendum, and recall.
6. SB 273 term limits state representatives to six consecutive two-year terms, and state senators to three consecutive four-year terms.
7. SB 274 provides for an advisory referendum as part of the next general election to allow the people of Hawaii to vote in favor of or against the Akaka Bill.
8. SB 275 & SB 276 repeal the constitutional provision creating the commission on salaries; and repeal statutory provisions of the commission on salaries.
9. SB 277 allows the legislature, governor, and department heads to request investigations into the constitutionality of federal laws and mandates, and requires the attorney general to initiate legal action when a federal law is in violation of the U.S. Constitution.
10. SB 278 “Right to Work” protects an individual’s right to gainful employment regardless of membership in any special interest or labor organization.
Details about each bill in the Senate Minority bill package can be found at this link:
