This week, we are continuing our coverage of creative tax-related bills at our legislature. The Hawaii State Tax Watch Doggie is taking a nap at the moment so I’ll continue without him.
Let’s start with the revenue raisers.
SB 1373raises the GET rate. At least that one is straightforward and easy to understand. SB 1474raises the GET rate a little more, but this would fund the DOE and the University of Hawaii. How much are the rate increases? 0.3% and 0.5%, respectively, but if the bills move the number probably will be amended. Next!
HB 1459/SB 1463enacts a carbon tax, which we have written about before here and here, and replaces the current fuel tax and the barrel tax. HB 1287and HB 1579just enact a carbon tax, leaving the other taxes on fuel in place, although HB 1287 says that half of the tax is to be refunded to taxpayers through the income tax system.
SB 1114requires a tax clearance to be obtained before getting or renewing any professional or vocational license in Hawaii. Given that we require licenses for more vocations and occupations than many other states(and are the most burdensome to licensees), coverage would be broad. But it would create minimal benefit in exchange for the extra time and paperwork for the law-abiding citizens, who we hope are most licensees.
SB 1361increases the estate tax for taxable estates over $10 million. At least that’s what it says now.
SB 1362increases the conveyance tax for the sale of homes over $2 million. Gone forever are the days it was just 0.05% of the sale price (5 cents per $100 of value).
And then let’s not forget tax credits. Many lawmakers are sponsoring credits to encourage desirable social behavior—I think.
HB 1215awards a tax credit for people who live within 10 miles of their working place. I have my doubts about that one. People already have lots of motivation to live close to work. (It’s called “traffic.”) If anything, those of us who are forced by land prices to live out in the ‘burbs need relief from the punishing fuel taxes that need to be paid to keep the ol’ jalopy chugging along.
HB 1216awards a credit for people who run a business out of their own home. What’s the philosophy behind this one? Is it that people who run such a business must be impoverished because they can’t even afford to rent a proper office? I suppose small businesses need all the help they can get but drawing the line in this way is just odd.
SB 1473establishes a food expenditure tax credit. The bill says the credit is based on adjusted gross income, but there is no table or schedule to tell us what the amount of the credit would be. There is also language defining qualified food expenditures—the cost of food and dietary supplements count, prepared food and alcoholic beverages don’t count, anything coming out of a vending machine doesn’t count, and tobacco products don’t count. At present the credit doesn’t seem to depend on the amount of qualified food expenditures, so why define the term? If the answer is that individuals are supposed to keep track of their own food expenditures and then submit a credit claim after a year, I wonder if it’s realistic to expect any taxpayer to do that while following all the rules correctly.
Good luck to all of us—no one’s safe when our Legislature is in session!!
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Tom Yamachika is the President of the Tax Foundation of Hawaii, a private, nonprofit educational organization dedicated to informing the taxpaying public about the finances of our state and local governments in Hawaii. Tom is also a tax attorney in solo practice and has been since early 2013. Prior to 2013, he was with the accounting firm Accuity LLP, which was formed in 2006 from the Honolulu office of Coopers & Lybrand (which later became PricewaterhouseCoopers). Before that, he served as an Administrative Rules Specialist in the State of Hawaii Department of Taxation from 1994 to 1996, where he drafted rules, interpretive releases, and legislation on several different state taxes. Prior to that, he practiced litigation and tax law with Cades Schutte Fleming & Wright in Honolulu.