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Wednesday, April 15, 2015
Senate Passes Rail Surcharge Extension, State to Skim $496M
By Sen. Sam Slom @ 2:54 AM :: 5738 Views :: Rail, Taxes

Hawaii Senate Passes Rail Surcharge Bill 

News Release from Office of Sen Sam Slom, April 14, 2015

HONOLULU – Today on the floor of the Senate chamber, lawmakers voted on whether or not to extend the rail surcharge.  Easily the most contentious issue of the 2015 legislative session, House Bill 134 Senate Draft 2[1] was approved by 22 members of the Senate, and met with only three no votes from Senators Sam Slom, Laura Thielen and Gil Riviere.

Senator Sam Slom says, "An extension of the half percent increase seems like nothing, but the effect on taxpayers is substantial.  I am against extending the additional burden on Oahu's taxpayers."

Senators Russell Ruderman, Glenn Wakai, Lee Ihara, Mike Gabbard and Gilbert Keith-Agaran voted in the affirmative but with reservations.  A no vote at this stage serves to exclude the person voting no from participating in the Conference Committee, and is a possible motivation behind voting with reservations rather than voting no.

Only taxpayers living on Oahu are saddled with financing the rail project, and some may not live long enough to see the finished product transport its first passengers.

According to Senate Minority budget director Paul Harleman and also a study by the Institute on Taxation & Economic Policy[2], Hawaii's general excise tax is among the most regressive, and far reaching.  A taxpayer on Oahu earning $10,100 annually pays general excise taxes equaling 11% of their overall income, with $103.10 each year going to the rail surcharge.  A taxpayer earning $42,100 will pay $253.94, just for the rail surcharge portion, and someone with a salary of $66,800 has a rail surcharge liability of $316.14.

Lowest Second Middle Fourth Top 20%
Income Group 20% 20% 20% 20% 15% 4% 1%
Average Income $10,100 $25,000 $42,100 $66,800 $116,800 $236,500 $811,300
Overall Taxes Paid as a % of Income 11% 8.50% 6.50% 5.10% 3.70% 2.20% 1.20%
Sales & Excise Taxes paid $ $1,111 $2,125 $2,736 $3,406.80 $4,321.60 $5,203 $9,735
Rail Surcharge $ $103.10 $197.19 $253.94 $316.14 $401.03 $482.82 $903.42

Critics of extending the rail tax surcharge often cite poor budgetary and project management by HART officials, but the Senate Minority cautions against turning a blind eye to the role the state has played in the budget shortfall which is prompting the need for the extension.  The state is collecting the rail surcharge for Honolulu County and retains 10%, which it places into the general fund.  HART projects that between 2009 and 2027, the monies retained by the state for administrative costs will total just short of a half a billion dollars ($496 million), while the overall rail surcharge tax collections will amount to approximately $5 billion ($4,961 million) dollars from Oahu residents alone.

Residents of the other islands in the state of Hawaii are spared from the surcharge to date, but the Hawaii Revised Statutes permits counties to implement a surcharge for transportation projects. (see HRS §46-16.8(c))

Senate Minority budget director Paul Harleman adds, "What is important to note is that over the project's lifespan, the state is projected to have skimmed a total of $496 million from the GET surcharge collections, which is about half the size of the projected deficit.  If the state stopped keeping 10% of the surcharge, the extension could be reduced by one to two years."

All bills approved by the Senate today originated in the House of Representatives, and are said to have “passed Third Reading.” These “Senate drafts” will proceed to the House of Representatives.  Then, the House can either agree or disagree with the changes approved by the Senate.  In the latter situation, the bill proceeds to conference committee, where any conflicts will be ironed out by appointed members of each chamber, called "conferees."  However, as stated earlier, anyone who voted no on a measure is not allowed to participate in conference committee for that bill.

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RELATED: Hawaii Second Highest Taxes on the Poor



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