Monday, October 21, 2019
Hawai'i Free Press

Current Articles | Archives

Sunday, August 04, 2019
Withholding, the Root of All Evil?
By Tom Yamachika @ 5:00 AM :: 784 Views :: Taxes

Withholding, the Root of All Evil?

by Tom Yamachika, President, Tax Foundation Hawaii

Withholding is making someone who isn’t liable for tax, but who pays money to someone who is, responsible for collecting and paying the tax to the government. Employers, for example, must withhold federal and state income taxes out of wages paid to their employees. 

The government also makes the buyer withhold taxes on big property sales. The federal government requires withholding when property is sold by a foreigner. Our state government also requires withholding when property is sold by a nonresident. 

This year, we took withholding one step further by enacting Act 232, a law that requires partnerships, estates, and trusts to withhold on income distributed to nonresidents. That law went into effect at the beginning of this year, but the Department of Taxation has come out with Announcement 2019-08 saying that they won’t be ready to enforce that law until the beginning of next year.

Interestingly, the law does not apply to “publicly traded partnerships,” which are partnerships with so many partners that their partnership interests can be bought and sold on a stock exchange just like shares of stock. Under federal law, these partnerships are treated the same as corporations. The PTPs complained in testimony that it’s such a bother to make them withhold:

[T]he requirement to withhold tax on behalf of nonresidents would be an extremely burdensome requirement for PTPs. Federal law does require brokers to report to PTPs specific ownership information on units held in street name, including name and address. However, this information is provided only once a year….

In other words, enough information goes to the PTPs so that they can send out federal Forms 1099-DIV to their unit holders so they can include that information in their respective federal tax returns. In the same testimony, furthermore, the PTPs offered to file an annual information return reporting name, address, taxpayer ID number, and income sourced to the state for each unit holder. That offer got written into the law. So, the PTPs can send out information returns to everyone but it’s too much humbug to cut the State a check? Forgive me for laughing.

There was one more bill to require withholding – the so-called “AirBnB Bill,” which was vetoed. The bill would have required transient vacation rental platforms such as AirBnB, HomeAway, and Flipkey to withhold general excise and transient accommodations taxes on transient vacation rental units booked through those platforms. Tax compliance is the responsibility of the unit owners, but not everyone knows about or pays the taxes, so withholding would increase compliance.

The Governor’s veto message says, “While requiring the hosting platforms to collect and pay the taxes on illegal transient accommodation uses would not legalize these operations, there is concern that it could be viewed as legitimizing these operations.” This message sounds like he is trying to talk out of both sides of his mouth.

Withholding has nothing to do with legitimizing illegal activity. If business is being conducted, tax is owed and should be collected whether the business is legal or not. Remember, the tax laws didn’t legitimize Al Capone’s activity; instead, they put him behind bars.

Rather, the real issue seemed to be that the county passed zoning laws but wasn’t enforcing them, and the prospect of State withholding seemed to be a convenient way for the counties to put the issue on the State’s back. But, counties, how about this for a solution? Find advertisements for illegal vacation rentals, confirm by online search that they aren’t registered for tax, and then rat them out to the State Tax Office! Then you can use your people to enforce your laws against other illegal rentals.

Links

TEXT "follow HawaiiFreePress" to 40404

Register to Vote

2aHawaii

808 Silent Majority

808 State Update AM940

ABCDEFG Blog

ACA Signups Hawaii

ACCE

ALEC

Alliance Defending Freedom

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