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Tuesday, April 16, 2019
Tax Foundation Hawaii: Motion for Reconsideration Rips Rail-Skim Decision
By Tax Foundation @ 6:02 PM :: 2986 Views :: Taxes


Tax Foundation v Hawaii, Civil No. 15-1-2020-10

Filed April 15, 2019

The monetary stakes in this case are large-if the amount the State retained out of Oahu-based GET was reduced to reflect the actual costs enumerated in H.R.S. §248-2.6(c) ("Subsection (c)"), $125 million or more would flow into the Honolulu County coffers for its rail project. Conversely, if the State is allowed to keep that sum, taxpayers (including the Tax Foundation) who are obligated to pay the Oahu GET surcharge will be forced to pay the amount wrongly diverted, in addition to the legitimate project costs, which adds direct economic injury to the insult of a badly managed project that is already far over budget.

Unfortunately, the Court here obscured the merits by devoting nearly all its attention (116 pages) to an unnecessary exegesis on the non-jurisdictional nature of standing and the showing of harm (not "injury in fact") required to seek declaratory relief under H.R.S. §632-1. The majority undertook this analysis (and inaccurately stated that the Foundation sought declaratory relief (Opinion at 7)), even though:

(1) the Tax Foundation's status as an economically aggrieved taxpayer was never seriously in doubt;

(2) the Foundation predicated the Circuit Court's jurisdiction on five different statutes (H.R.S. §§603-21.5, -21.7, -21.9, 634-35, and 663-1) in addition to H.R.S. §632-1;

(3) the jurisdictional restriction in H.R.S. §632-1 only restricts the issuance of declaratory relief in disputes with respect to taxes; and most importantly,

(4) the Foundation requested four types of relief, none of which was a declaratory judgment.

The short analysis of the merits (labeled Part Three of the Majority Opinion), which follows the majority's jurisdictional opinion is deeply flawed. Specifically, Part Three:

(1) mischaracterizes the statute's two-step money distribution mechanism;

(2) disregards the Court's jurisprudence requiring that the amounts skimmed by the State actually be reasonably proportional to the costs actually incurred in assessing, collecting, and disbursing the surcharge;

(3) invokes a patently false argument about the justification for the 10% surcharge, ignoring the fact that Act 247 was adopted in 2005 solely to enable counties to levy a surcharge-and not to provide added tax revenue to the State's coffers…; and

(4) declares, by baseless fiat, that a fee intended to cover the costs associated with collecting less than 5% of the State's total tax income is "reasonable" even though

(a) the 10% skimmed by the State was more than the total cost of operating the State's entire tax collection machinery, and

(b) the State refused to provide any estimate of the "contemplated costs" in Subsection

(c). If these errors were corrected, the Court would reverse and remand for trial to determine whether the costs were reasonably proportional to the collections instead of sua sponte directing entry of a summary judgment that is unsupported by undisputed material facts of record.

This is harsh criticism, but it is well-founded….

read … Motion for Reconsideration

March 21, 2019: Hawaii Supreme Court Rejects Rail Surcharge Lawsuit

TFI: Rail Surcharge Lawsuit Background


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