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Sunday, May 5, 2024
The Also-Rans
By Tom Yamachika @ 6:00 AM :: 1260 Views :: Taxes

The Also-Rans

by Tom Yamachika, President, Tax Foundation Hawaii 

News has been piling up about many of the bills that made it through this year’s legislative session.  We will be discussing some of those in the weeks ahead.  But this week we will be focusing on some of those bills that almost made it to the end but fell off just before the finish line. Some of us will be saying, “Good riddance!” while others, perhaps, will be bemoaning the loss.

HB 2504, for example, would have bumped up the cigarette tax another $0.02 per cigarette to $0.18. The University of Hawaii sponsored it, primarily because earmarks off the cigarette tax go to special funds that are used to benefit the UH School of Medicine. Disagreements quickly arose as to where the extra funds were going to go and the uses to which they would or could be put. The bill went to a House-Senate conference committee, but they were unable to reconcile differences in the bill versions.

SB 3176 was sponsored by the Department of Taxation. It would have provided that when a taxpayer is under audit, the auditor requests documents, and the documents aren't produced by a certain deadline after the request, then, unless the department allows more time, the documents can't be used in any appeal from the auditor’s assessment. Many tax practitioners strongly opposed the bill, saying among other reasons that the courts make their own rules on when to exclude evidence. Ultimately, House and Senate conferees couldn't work out their differences.

HB 2653 would have amended the Hawaii estate tax to allow interests in successful family-owned businesses to pass to next generation family members tax-free. The businesses launched a considerable public relations campaign, including several op-eds, in support of the bill.  However, some in the progressive wing of the Democratic Party were outraged at the prospect of tax breaks being given to the wealthiest of the wealthy. In the end, the bill was set to go to conference committee but the House failed to appoint conferees.

HB 2686 and SB 3234 would have increased the transient accommodations tax on vacation rentals and the conveyance tax on all property sales by unspecified amounts, with the new money raised to establish funds to stabilize property insurance. The new funds would be conceptually similar to the Hawaii Hurricane Relief Fund and would provide insurance of last resort for hurricane damage and lava inundation. One problem was that as the bill was going through the process, people couldn't figure out exactly how much money needed to be raised. The sections of the bill calling for tax increases kept moving through the session without the blanks being filled in.  In the Senate, the Ways and Means Committee turned the bill into one requiring a study to be conducted by the insurance commissioner. Ultimately, no agreement was reached on how to proceed.

And, last but not least, HB 2570 would have required out-of-state attorneys appearing in a local court or arbitration to have a GET license number and agree to pay tax. Apparently, a number of such firms came in, left, either didn't know or didn't care about our local tax, and didn’t pay it.  This bill went to conference committee and the Senate did not appoint conferees. But that doesn't mean that out-of-state law firms are going to get a free pass. The Hawaii state judiciary testified that they will impose the same requirements using the courts’ regulatory powers over attorneys.

In the coming weeks, we'll be highlighting some of the bills that did pass and are making their way to the governor's desk.


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