Wednesday, August 21, 2019
Hawai'i Free Press

Current Articles | Archives

Sunday, May 26, 2019
The “Rail Skim” Suit: We Lost the Battle, Taxpayers Won the War
By Tom Yamachika @ 5:00 AM :: 1712 Views :: Ethics, Rail, Taxes

The “Rail Skim” Suit: We Lost the Battle, Taxpayers Won the War

by Tom Yamachika, President, Tax Foundation Hawaii

A long time ago, in October 2015 to be more precise, the Tax Foundation of Hawaii sued the State. Why? Because at the time, the State was skimming 10 cents off every dollar that was being collected for rail, and it plopped the money into the state’s general fund, where it was spent on everything but rail. Its justification for pocketing the money was that there were various costs associated with administering and collecting the rail tax, and those needed to be reimbursed.

But the State was hauling in $25 million a year – a sum comparable in size to the entire budget of the state Department of Taxation. We thought the State was not only reimbursing itself, but was making a killing in the process, all at the expense of Oahu taxpayers.

When we initially filed our complaint, the State’s response was more about “jurisdiction” and “standing” rather than the meat of the dispute. In other words, they were saying, “And what right do you pipsqueaks have to be telling we the State how we should be spending our money? If anyone has a complaint, it should be the City government and not you runts.”

Our response was simple. Governments don’t pay taxes; taxpayers pay taxes. If taxpayer dollars are skimmed from rail, fewer dollars are available to build rail. To build the train, the City would then have to tax Honolulu taxpayers for a longer period. And indeed, the City got the Legislature to move the sunset date of the surcharge from 2022 to 2027 to 2030.

The Circuit Court tossed out the case. It reasoned that if the Foundation wasn’t seeking a tax refund (we weren’t), then the Foundation would be seeking a “declaratory judgment” which, under statute, cannot be obtained in tax cases; game over.

We appealed.

On March 21, the Supreme Court of Hawaii released three opinions, totaling 125 pages, saying that the Foundation loses.

The great bulk of all three opinions addressed the issue of standing. They reviewed the tortuous history of attempts by many nonprofit groups, from Life of the Land to Hawaii Insurers Council to Hawaii’s Thousand Friends, to get the courts to act in cases where they thought governmental power was being misused or abused. Rules were made, rules were bent, and rules were bent some more, depending on which version of the history you found more persuasive. Ultimately, four of the five Justices concluded that the Foundation did have standing. This means that we, or similar taxpayers, who feel that our tax dollars are being distributed unlawfully can go to the courts to get something done about it.

The merits of the suit are only addressed in the last ten pages of the principal opinion. There, four Justices were satisfied that the Legislature didn’t cross the line when it enacted the 10% skim. There would be “costs of assessment, collection, disposition, and oversight” of the new tax, people had no idea how extensive these costs would be; so 10% was a reasonable estimate. Also, it wasn’t discriminatory as compared with the other counties because if any of the other counties enacted a surcharge, they would have been skimmed as well. Game over.

We, of course, didn’t think the estimate was reasonable at all. How could the costs for assessing, collecting, and overseeing a mere 3% of the total revenues taken in by the tax system be around 100% of the costs to run the whole Department of Taxation?

In the end, however, we need to focus on the real issue, namely The Skim. What happened to that law that allowed the state to skim 10% of the county’s surcharge?

In the 2017 special session, the Legislature slashed the skim from 10% to 1%. It snipped out one zero, and the result was a huge victory for taxpayers. Would they have done it without the Foundation’s lawsuit hanging over their heads? We doubt it; the law contains an explicit reference to our lawsuit, so it’s clear that lawmakers were very much aware of it.

The Foundation may have lost the court battle. But all of us won the war.

Links

TEXT "follow HawaiiFreePress" to 40404

Register to Vote

2aHawaii

808 Silent Majority

808 State Update AM940

ABCDEFG Blog

ACA Signups Hawaii

ACCE

Affordable Hawaii Coalition

ALEC

Alliance Defending Freedom

Aloha Conservative Alliance

Aloha Life Advocates

Aloha Pregnancy Care Center

American Council of Trustees and Alumni

American Mothers of Hawaii

AMVETS-Hawaii

AntiPlanner

Antonio Gramsci Reading List

A Place for Women in Waipio

Audit The Rail

Ballotpedia Hawaii

Better Hawaii 

Blaisdell Memorial Project

Broken Trust

CAFR Hawaii

Castaway Conservative

Children's Alliance Hawaii

Children's Rights Institute

Christian Homeschoolers of Hawaii

Citizens for Recall

Cliff Slater's Second Opinion

Coffee Break

Conservative Forum for Hawaii

CSIS Pacific Forum

DAR Hawaii

DeedySupport.com

DVids Hawaii

E Hana Kakou Kelii Akina

E Māua Ola i Moku o Keawe

Farmers For Choice Hawaii

FIRE

Fix Oahu!

Follow the Money Hawaii

Frank in Hawaii

Front Page Magazine

Frontline: The Fixers

Genetic Literacy Project

Get Off Your Butts!

God, Freedom, America

Grassroot Institute

Habele.org

Hawaii Aganst Assisted Suicide

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii Coalition Against Legalized Gambling

Hawaii ConCon Info

Hawaii Credit Union Watch

Hawaii Crime Victims' Rights

Hawaii Crop Improvement Association

Hawaii Debt Clock

Hawaii Defending Marriage

Hawaii Defense Foundation

Hawaii Families for Educational Choice

Hawaii Family Advocates

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii Firearm Community

Hawaii Fishermen's Alliance

Hawaii Future Project

Hawaii Gathering of Eagles

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii March for Life

Hawaii Meth Project

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Right to Life -- Big Island

Hawaii Right to Life -- Oahu

Hawaii Shield Law Coalition

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together

Heritage Foundation

HI Coalition Against Legalized Gambling

HIEC.Coop 

HiFiCo

Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Homeless Crisis

Honolulu Navy League

Honolulu Traffic

Horns of Jericho Blog

House Minority Blog

House Republican Caucus YouTube

HPACC

Hump Day Report

I Vote Hawaii

If Hawaii News

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

Iowa Meets Maui

Jackson v Abercrombie

Jihad Watch

Judgepedia Hawaii

July 4 in Hawaii

Kahle v New Hope

Kakaako Cares

Kau TEA Party

Kauai Co GOP

Keep Hawaii's Heroes

KeyWiki

Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Malulani Foundation

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

Mauna Kea Recreational Users Group

MentalIllnessPolicy.org

Middle East Forum--The Legal Project

Mililani Conservatives for Change

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

Muslim Brotherhood in America

NAMI Hawaii

NARTH

Natatorium.org

National Christian Foundation Hawaii

National Parents Org Hawaii

National Wind Watch

New Zeal

NFIB Hawaii News

No GMO Means No Aloha

Northwest Economic Policy Seminar

Not Dead Yet, Hawaii

Now What I Really Think

NRA-ILA Hawaii

Oahu Alternative Transport

ObamaCare Abortion Hawaii

Obookiah

OHA Lies

Opt Out Today

OurFutureHawaii.com

Pacific Aviation Museum

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Pritchett Cartoons 

Pro-GMO Hawaii

P.U.E.O.

RailRipoff.com

Rental by Owner Awareness Assn

Republican Party -- Hawaii State

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

Salvage The Rail

Save the Plastic Bag

School Choice in Hawaii

SenatorFong.com

SIFE Remington

SIFE W. Oahu 

Sink the Jones Act

Smart About Marijuana--Hawaii

St Marianne Cope

State Budget Solutions Hawaii

State Policy Network

Statehood for Guam

Tax Foundation of Hawaii

The Harriet Tubman Agenda

The Long War Journal

The Real Hanabusa

Time Out Honolulu

Truth About Trade & Technology - Hawaii

UCC Truths

Union Members Know Your Rights

US Tax Foundation Hawaii Info

Valor in the Pacific

VAREP Honolulu

Waagey.org

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii

Yes2TMT