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Saturday, December 27, 2014
Eight Tax Hikes Proposed for Hawaii
By Andrew Walden @ 5:25 PM :: 5694 Views :: Taxes

"Sometimes things happen" -- Gov David Ige on tax increases, December 22, 2014

by Andrew Walden

The 2015 Legislative session opens January 21, but tax hikers aren't waiting around.  Here, from December, 2014 media accounts, is what they have proposed so far:
  1. GE Tax Surcharge
  2. TAT for TVRs
  3. Tobacco Tax for E-Cigs
  4. Internet Sales Tax
  5. REITS
  6. Pension Tax
  7. Waikiki Beach Replenishment
  8. GMOs

Scroll Down to See Details on Each of the Eight:

GE Tax Surcharge

Lying About 'Temporary' Tax Hikes is Old Tactic

KHON: A temporary excise tax surcharge — which, when applied to the 4 percent excise tax, actually computes to 4.712 percent — helps pay for most of the $5.2 billion project.

So far, that surcharge has collected a little more than $1.3 billion. Even though surcharge collections have generally risen since the surcharge went into effect in 2007, project officials say they are now $41 million short of projections.

That triggered the push to extend the tax beyond its expiration date, now to the end of 2022.

“At the moment, what’s happening is it’s costing every taxpayer $200 a year, and that’s every man, woman and child,” said Tom Yamachika, the president of the Tax Foundation of Hawaii.

That is a $200 hit to each person’s wallet, and it adds up when you consider the impact on a family of five. For that family, that’s $1,000 a year, and that has been the impact for the past seven years.

Lawmakers promised in 2005 that the rail surcharge would be temporary. The last time state lawmakers talked about a temporary tax was back in 1986. It was the hotel room tax, proceeds of which were meant to help build the Hawaii Convention Center. The center was opened in 1998, and the tax is still with us.

“Not only is the convention center built, but the tax then was 5 percent,” said Yamachika. “We’ve come a long way since then, and now its 9.25 percent, and it’s just been made permanent.”

KHON2 asked Joe Souki, Speaker of the State House of Representatives, what the chances are of making the rail tax surcharge permanent.

“I don’t think so,” said Souki. “It will be a challenge just to have the extension.”

Still, Yamachika remembers the promises made in 1986 with the hotel room tax and 2005 with the rail surcharge.

“They told us when they originally enacted the tax that it would be temporary,” said Yamachika. “And we hope they will keep their promise. But as we know from lots of things that have happened in the state, lawmakers don’t always keep their promises.”

read ... $1000 per Family

Caldwell: HART GE Tax Revenues Being Manipulated to Fake Crisis

KITV: Taxes are expected to fund nearly 70 percent of the rail project, but that money's running $40 million behind projections.

"I don't understand why the GET for the state is going up very steeply and the GET on Oahu are far below that.  When we know the strong economy is on this island and not the neighbor island," said Caldwell.

That tax is expected to end in 2022.  But Mayor Caldwell says one of the solutions to the rising cost is to extend that tax.  Another option is the city would issue low interest bonds.  But, one thing's that's not on the table is using more than $200 million in federal dollars normally used for the city's bus system.

"I'm going to make this clear.  As mayor, none of the bus money will be used for rail.  It is about bus and rail together and taking away money would pit bus against rail," said Caldwell....

read ... Caldwell

Lawmakers question the rush to extend rail surcharge

SA: ...Grabauskas and other HART officials suggested several ways of addressing the anticipated shortfall, including extending the GET surcharge beyond its 2022 expiration date, possibly permanently.

That suggestion touched off a furor among critics and skeptics of the rail project, who said it was inevitable that the price tag would jump.

But Senate Ways and Means Chairwoman Jill Tokuda and House Finance Chairwoman Sylvia Luke on Friday said they want city officials to paint a clearer picture of why they need more money and why they have to make such a critical decision seven years before the sunset date of the surcharge.

Since the Legislature agreed to the surcharge in 2006, HART and the Hono­lulu City Council have controlled how the rail project should be financed, Luke said. "The state Legislature has been completely out of the picture (on) the rail discussion," she said.

If HART officials want an extension, it's up to them "to educate the legislators and state officials now about what's going on, what are some of the problems," she said. (Translation: HART must invent justifications for us to raise taxes.)

Luke (D, Punchbowl-Pauoa-Nuu­anu) said she expects the discussion to take place during hearings in the transportation and money committees before lawmakers have enough information to make intelligent choices.

Tokuda (D, Kailua-Kane­ohe) said she expects city officials to give a preview of their request at a joint informational budget briefing before the Finance and Ways and Means committees in mid-January, when the City and County of Hono­lulu and the other three counties typically outline their top legislative priorities for the session....

One key question is why a decision to extend the surcharge needs to be done in the 2015 Legislature and not closer to the 2022 sunset date when there will be a truer picture of the actual project cost, she said....

State Rep. Gene Ward (R, Kalama Valley-Queen's Gate-Hawaii Kai), a rail critic, said Hono­lulu officials are reneging on their agreement with state lawmakers and taxpayers to keep the tax going only through 2022.

"I think it's a broken promise, is a simple way of putting it," Ward said. He and others are reluctant to vote for any tax increase, and city officials should simply find a way to work the rail project so they can "live within their means." ....

Kobayashi said it may be time for HART officials to seriously consider scrapping plans for rail and instead allow buses, instead of trains, to travel exclusively along the 20-mile guideway from East Kapo­lei to Ala Moana Center.

Such a plan would eliminate the need for rail cars and tracks, and allow more commuters from outside the guideway, such as Wai­anae, Maka­kilo, Ewa Beach, Mili­lani and Wahiawa, to take advantage of a dedicated route without ever needing to get off their buses, she said.

"Maybe that might be cheaper," Koba­ya­shi said. "And then we wouldn't have to have park-and-rides."

In response to a Hono­lulu Star-Advertiser query, Grabauskas said in an email that it's too late to entertain that idea.

Under the city's full funding agreement with the Federal Transit Administration, "we are not allowed to change our plans mid-stream from a rail transit system to one using buses," Grabauskas said. "To switch from steel-on-steel rail technology to buses using rubber tires, we would have to return the existing federal funding and reapply for the money."

read ... Lawmakers question the rush to extend rail surcharge

$500M Short? HART Cites Its Own Incompetence as Reason for Massive GE Tax Hike

SA: Oahu's rail transit system is on track to cost at least half a billion dollars more than originally budgeted, according to a financial assessment released Thursday by rail officials, who blamed lagging tax revenues, fast-rising construction costs and project delays.

The report, presented at the Honolulu Authority for Rapid Transportation board meeting in Kapolei, warns that the $5.26 billion rail project could wind up costing taxpayers 10 to 15 percent more than budgeted. A 15 percent increase would raise the project's total cost to more than $6 billion.

To deal with the mounting costs, rail officials are floating (Straw-Man arguments designed to steer the gullible into extending the 0.5% GE Tax) several possibilities, including one the city has been reluctant to take so far: Diverting more than $200 million in federal dollars normally used for the city's bus system. (Now we will discuss this straw-man proposal at length to scare you into raising taxes.)

Those so-called "5307" federal Urbanized Area Formula Program funds were included in the financial plan to build rail essentially as an added layer of insurance, even though various elected leaders and bus advocates questioned the move. Federal transit officials also cautioned against using those dollars for rail, citing Honolulu's relatively old bus fleet.

Now, in its "project risks update" report, HART officials say the city will have to come up with $210 million from somewhere else if it wants to keep avoiding the federal bus dollars included in the rail financial plan.  (OK.  Enough with the Straw Man, lets get to the real point.)

The new HART report further suggests that to help pay the growing costs to complete the project, city and rail officials should consider extending the 0.5 percent general excise tax surcharge for Oahu, which is scheduled to expire in 2022 -- or even lift the tax's sunset altogether.

It's a move that city and rail leaders already have been discussing for about a year.  (That's the most honest sentence in the entire article.)

CB: Honolulu’s $5.2B Rail Project Could be Up to $700M Over Budget

read ... We're Failures so give us more money

TAT for TVRs

Star-Adv: Legalizing Illegal Vacation Rentals Could be Cash Cow for State

SA: The widespread proliferation of mostly illegal vacation rentals on Oahu is ... likely leaving millions of tax dollars uncollected.

While this black-market economy has sprung up across Oahu, Honolulu Star-Advertiser research shows that the North Shore and Kailua are the strongholds for illegal vacation rental activity. As many as 80 percent of these vacation rental owners may be operating outside of city restrictions, the research indicates....

Matt Curtis, director of government relations for online vacation rental giant HomeAway.com, said the more challenging a destination's regulatory environment, the less likely that landlords will comply. He said New York City banned short-term rentals in 2010, and now there are four times the number of listings.

"New York is missing out on $450 million in taxes," he said. "Successful communities have fair regulatory environments that are easy to comply with."...

Barry Wallace, executive vice president of hospitality services for Outrigger Enterprises Group, said vacation rentals must be made to operate legally.

Anyone conducting business under the table unfairly competes with resort condos, eliminating well-paying hotel jobs, he said.

"Because they don't pay taxes or have as many employees, they can undercut us," he said....

read ... Tax Hike #1

TVR Report Designed to Make Case for Tax Hikes

KGI: ...“TVRs have clearly become a popular accommodation choice with beautiful homes located in resort neighborhoods,” Kauai County Economic Development Director George Costa said. “It is very difficult to monitor from a tax perspective because many are independently owned and marketed. Our challenge is to ensure that alternative accommodations are properly permitted and properly classified for real property tax purposes.” ...

“It will provide the counties with information to help them better understand this segment when making policy decisions in the future,” Williams said....

The trend could affect the state’s pocketbook.

Hotels charge visitor fees that contribute to the general excise tax or transient accommodations tax. The state and counties could well be losing out on potential revenues from non-traditional housing that would otherwise come from hotels, condo associations and timeshares.

“Our lodging people are not looking to put anyone out of business but what we’re asking for is to put everyone on a level playing field,” Szigeti said. “Everyone should pay their fair share of the fees that come with accommodations.”

“We are changing the model all the time and this study is a great road map to look at,” he added. “There are a lot of challenges and people are trying to get their arms around this and do the right thing raise their taxes.”

Background: HTA Study: Vacation Rental Units are 25% of Total Lodging

read ... Tax Hike Coming

Several States Could Regulate and Tax Short-Term Rentals in 2015

SK:  ...That’s the word from the Travel Technology Association, which has a membership that includes major online travel agencies such as Expedia and Orbitz, global distribution systems like Amadeus and Travelport– and HomeAway and Airbnb.

Philip Minardi, who heads public affairs for the association, says California, Hawaii, North Carolina, Rhode Island, Texas, Wisconsin and Utah are expect to take up legislation at the state level to regulate the short-term rental industry in 2015.

“Most are discussing two different, but obviously related issues,” Minardi says. “How to legalize short-term rentals, but also, as states try to squeeze out funds wherever they can, how to tax short-term rentals.”

The association has expressed opposition to the numerous lawsuits around the country filed by cities, counties and states seeking to recoup from online travel agencies what the plaintiffs view as unpaid hotel occupancy taxes....

read ... Several States Could Regulate and Tax Short-Term Rentals in 2015

Tobacco Tax for E-Cigs

E-Cigs to Be Targeted for Tax Hike

SA: Health advocates tried and failed last legislative session to persuade lawmakers to impose higher taxes on the devices and associated supplies; require licenses for retailers; and restrict vaping at workplaces and other public places....

State Sen. Josh Green, a Hawaii island Democrat who chairs the Senate Health Committee, agreed, and, like Au Bellati, vowed to press again this upcoming legislative session for the type of bills that died late in last year's session.

Green, who described the issue "as a priority for me personally, as a physician and a lawmaker," said he would focus on raising the age to acquire e-cigarettes to 21 statewide, following the model of Hawaii County; move to include electronic smoking devices in Hawaii Revised Statutes 328-J, the clean air law, which bans smoking at all public and private worksites; and strive to tax the sale of electronic smoking devices and supplies at the same rate as combustible tobacco products....

read ... Tax Hike 

Cancer Center Used as Latest Excuse for Tax Hikes

SA: The University of Hawaii Cancer Center is facing an uncertain future as revenue streams shrink and financial losses mount at the research facility. At the same time, federal requirements call for operations to expand.

The Cancer Center, a research unit of UH-Manoa, ended last year with a nearly $10 million deficit and is quickly draining its reserves to stay afloat. While some cancer researchers blame the controversial former director for allegedly mismanaging funds, UH officials say the center's money troubles stem from an outdated business model....

The center pursued building a state-of-the-art facility — initially expected to cost $119 million — based on a 2010 business plan that assumed UH's share of the state's cigarette tax would remain steady at close to $20 million a year. But cigarette tax revenues have been declining while completion of the Kakaako facility has saddled the center with an $8 million annual mortgage payment that it can't afford.

Without help, the center — which has a mission of reducing the burden of cancer through research, education and outreach — will deplete its reserves within two years....

(Insert straw man argument about selling the Cancer Center, then ... drumroll please.....)

UH plans to seek a broader tobacco tax and other legislative funding this session.... (Clash cymbals)

Best Comment: "This is typical. Former directors Carbone and Hinshaw screwed up the financing and then bailed before the truth came out. And the UH will continue to hire these jokers...."

read ... Costs outweigh funding, revenue

Internet Sales Tax

Ige Proposes Internet Sales Tax: $26B budget boosts Spending 8%

KHON: “The four and eight percent increase really is about obligations made previously that we need to fulfill,” he said.

The budget calls for $12.6 billion for fiscal year 2016, a four percent increase from the current budget, and $13.1 billion for the following year, an eight percent increase.

Among the significant general fund requests are $63 million for Department of Education and University of Hawaii capital improvement projects, $9 million for increased utility costs to the DOE, and more than $165 million for retirement benefit payments.

Ige adds that the state currently has the reserve to cover these costs.

“The fact that we did have a healthy balance does allow us to manage the financial plan in a way where we’re not looking at layoffs or (reduction-in-force), but that also means that there’s little fund available for new initiatives or new programs.”

The Governor did add there’s money out there if we’re willing to invest in tax modernization, going after taxes owed to the state that are not being collected, and even taxes on out-of-state internet sales.

“I do believe that it can generate hundreds of millions of dollars if we can collect the taxes already owed,” he said.

read ... $26B

REITS

REITS Targeted for $60M Tax Hike--to be Passed on to Tenants

SA: Currently, around $14 billion of Hawaii property is owned by REITs. These companies are earning an estimated $700 million to $1 billion every year in Hawaii, but they pay zero income tax. That is a loss of between $30 to $60 million annually in taxes for Hawaii.

Then there's the capital gains tax on the sale of these properties, which is also not being taxed in Hawaii.

If a REIT sells one of its trophy shopping centers in Hawaii for a $100 million gain, the taxes on the gain are paid to the mainland states where its shareholders live. Hawaii gets nothing.

If a local corporation sold a property for a $100 million gain, the state of Hawaii would collect $4 million in capital gains tax.

REITs may pay general excise tax, conveyance tax and real property taxes in Hawaii, but in the case of the retail, office and industrial properties, 100 percent of those taxes are passed on to the REITs' overburdened local tenants....

2014: HB1726

read ... $60M Tax Hike

Pension Tax:

Definition of Insanity?  Neil Milner Renews Push For Pension Tax

Milner:  Old people in Hawaii should pay more state taxes.

Right now, Hawaii is a tax haven for the elderly. The majority of states as well as the federal government tax Social Security. Hawaii does not.

Unlike almost all other states, Hawaii also exempts all employer-funded pensions, all out of state government pensions as well as other military federal, state and local benefits. Even some private pensions are exempt....

read ... Definition of Insanity

Waikiki Beach Replenishment

'Beach Replenishment' is Latest Excuse for Tax Hike

KHON: Half of the $1.3 million budget to do the first part of renovation would come from the state legislature. The other half would come from a special assessment to commercial landowners....

Over 6,500 properties would be assessed. Bill 82 has already passed its first reading and goes to committee next month.

Click here to view the plan in its entirety (.pdf).

KITV: Erosion creates dangerous situation on Waikiki Beach

read ... One Note Caldwell

Bill 81, Bill 82 Tens of Thousands of Dollars per Lot in New Taxes

SA: ...a new tax ... to be adopted by the Honolulu City Council.

Two bills, which will have their first reading Wednesday, would enable such a change; they deserve swift consideration.

The first, Bill 81, enables the Council to create a new special improvement district for this purpose, adding a new category for "construction of shoreline improvement, restoration and protection projects."

The second, Bill 82, would create the Waikiki Beach Special Improvement District and set up the plan, which defines the district as encompassing Waikiki from the Ala Wai Canal to the sea and from the Ala Wai Boat Harbor to Kaimana Beach on Kalakaua Avenue.

A fund would be established to be managed by a nonprofit association, with the assessment to be collected from owners of Waikiki commercial properties. That would exclude residential dwellings unless it is legally certified as a "transient vacation unit."

Council sponsors of the bills and the other supporters of the initiative — primarily the Waikiki Improvement Association — project raising about $600,000 annually through the tax, amounting to 7.63 cents per $1,000 of assessed property value.

Owners of the large beachfront parcels would pay in the tens of thousands of dollars per year, but the assessment would be under $100 for smaller off-beach lots....

read ... Another Honolulu tax Hike

Bonus: Tax Hike: City Chooses to Boost Property Assessments 7.1%

GMOs

Mayor veto of GMO Ag Tax stands

KGI: The Kauai County Council on Wednesday officially killed a bill that would have used lease rents, rather than fair market values, to help calculate real property tax assessments for biotech research land users.

The decision, by a 5-1 vote, affirmed Mayor Bernard Carvalho Jr.’s veto against the bill earlier this month in which he expressed concerns about the bill’s impact on the agricultural industry on Kauai and the county’s ability to enforce it.

The council agreed.

“I don’t see how it fits into an equitable tax system,” Councilman KipuKai Kualii said before casting his vote against the bill.

KE: Musings: Petty Politics

read ...  No New Taxes

Kauai Council to Vote on Anti-GMO Agriculture Tax Hike

KGI: The Kauai County Council will decide next week whether they want to override a vetoed law that would use lease rents, rather than fair market values, to calculate the real property taxes of biotech research land users.

The seven-member board, by a 5-0 vote, decided to revive the killed law during their meeting Wednesday, paving the way for a final vote on it to take place during their Wednesday meeting.

“I think he (the mayor) sums it up — it’s not a legal issue, it’s a policy issue,” Council Chair Mel Rapozo said before casting his vote. “From what I’m reading from the mayor, he basically believes that the bill conflicts with the state constitution, and I tend to agree with him. I will be voting to support the veto next week.” 

Councilman Arryl Kaneshiro, a project specialist at Grove Farm Company, was recused from voting on it.

read ... Anti-Agriculture

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