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Sunday, January 15, 2017
Michael, Row the Boat Ashore
By Tom Yamachika @ 4:01 AM :: 3254 Views :: Jones Act, Taxes

Michael, Row the Boat Ashore

by Tom Yamachika, President, Tax Foundation Hawaii

On December 13, 2016, Governor Ige signed off on, and thereby finalized, significant increases in fees charged by the Department of Transportation Harbors Division. These charges are assessed each time cargo enters or leaves a Hawaii port. Under the Harbors Division’s administrative rules, these fees will increase 17% beginning on February 1, 2017; they will increase another 15% on October 1, 2017; they will increase another 15% on July 1, 2018; and they will increase on July 1 of each year thereafter, by either 3% or the consumer price index rate, whichever is higher.

To give an idea of what that means, the cost of receiving one car from overseas by boat will go from $34.84 now to $40.60 on February 1, $46.69 on October 1, and $53.69 on July 1, 2018.

Most of the goods that we buy come here by boat. Shippers who operate the boats will of course pass the costs on to retailers who sell the goods, who then will pass those costs on to people who buy the goods, like you and me. (The price increases, of course, will require more General Excise Tax to be paid, both by the shippers and the dealers, and those taxes too will be passed on to the end users. Ouch!)

This all happened while the Legislature is out of session, so our lawmakers can’t be accountable for these fees, right?

That’s not quite true.

Administrative rules are issued by government agencies, but no agency has inherent power to make them. Lawmakers must pass a law to give the agency that power. For example, if you look at the Harbors Division’s proposal for new administrative rules, the rule that effectuates many of the changed fees, section 19-44-73, has near the very end the notation, “Auth: HRS §§266-2, 266-17.” That means the agency is telling us that its authority to issue the rule comes from Hawaii Revised Statutes sections 266-2 and 266-17. Every agency must put a similar notation on each rule it issues citing the legal authority that allows the agency to issue that rule.

In a case called Haole v. State, a 2006 case, the Hawaii Supreme Court ruled that a different Harbors Division rule, section 19-41-7, was invalid because it went beyond the power that the authorizing law had given to the agency. That rule said that anyone using the harbor had to indemnify and hold the State harmless for anything that happened at the harbor. A Mr. Haole was riding a motor vehicle while it was being offloaded from a ship, and the vehicle hit a pipe protruding from the ground. Mr. Haole was injured, and sued his employer and the State (claiming that the State should have gotten rid of the pipe). The lower court tossed out his case against the State because of the rule, but our supreme court said that the underlying law didn’t say anything about the State being excused from liability. So, the case went back for the State to stand trial.

Rules are limited by the underlying law. Therefore, if we in the public have a problem with an agency wreaking havoc with rules that they issue, we can ask our lawmakers to limit the agency’s statutory authority to issue those rules. For example, those who have a problem with the Harbors Division piling on double-digit percentage increases in the harbor fees can look up the underlying authority, namely HRS sections 266-2 and 266-17. Then they can go to the legislature to ask our lawmakers to write some limits into sections 266-2 and 266-17 so the agency can’t do whatever it pleases when it comes to harbor fees. In that way, agencies can be held accountable to the public they are supposed to be serving.


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