Thursday, June 30, 2022
Home Blog Page 3

Germany, the Ukraine and the EU

0

by Manfred Henningsen

Emeritus Professor of Political Science, University of Hawaii, Honolulu

Manfred Henningsen - Department of Political Science, UH Mānoa
Manfred Henningsen

Whatever the explanation for the alleged withdrawal of president Steinmeier’s invitation may have been – and official Ukrainian stupidity or arrogance are possible answers – his proximity to his former mentor and ex-chancellor Gerhard Schroeder and his strange friendship with Putin are well known and may have played a role. His participation in negotiating in 2008 the Minsk agreement as the former foreign minister and his support for sustaining the crucial energy supply connections with Russia may have underscored his negative image in the Ukraine.

Nevertheless, there is a substantial reason for Germany to demand the immediate admission of Ukraine to the EU. This is not just a matter of finally removing the historic mortgage left by the German terror regime in Ukraine during the Second World War. At this political moment, when Putin succeeded Hitler with the delusional obsession of a “mad tsar,” as Navalny called him, the German government should make this demand the primary goal of German foreign policy.

Gerhard Schroeder

In the last seven weeks, the Ukrainians have proven what can be said of only a few members of the EU, and certainly not of their neighbors Poland and Hungary, why the EU’s role in the survival of a civil political culture in Europe is not only necessary but must be expanded. They risked and sacrificed their lives thousands of times every day, and with millions of refugees who proved that Putin’s ‘Greater Russian Empire’ cannot compete with a free and democratic Europe. Ukrainians are in the process of giving the EU’s institutional skeleton a spiritual backbone. They alone show the member states of the Union that have forgotten the anti-totalitarian intentions of its founding after the Second World War or have never understood why it is crucial to enrich this EU with political and spiritual substance.

Whatever the political arguments of Angela Merkel and other German and European politicians from 2008 to 2021 may have been to oppose Ukraine’s membership, these objections have become irrelevant. The Russian invasion and Putin’s megalomaniacal aspirations have shown that there are no limits to him. NATO should have been reinvented, as it were, in order to stop Putin. If it was the oligarchs’ influence on Ukrainian politics and the general susceptibility to corruption that strengthened Merkel and others in their opposition, these deficiencies will not survive Russia’s imperial assault. The country will find itself in a tabula rasa state, which in some respects will be reminiscent of Germany in May 1945.

Russian troops blocking the Ukrainian military base in Perevalne

The crucial difference between the two situations, however, will be that Germany had to be liberated from the outside, while Ukraine liberated itself. The consequences of total destruction did not lead, as Harald Jaenner recently traced in his book Wolfszeit (2019), to the immediate self-purification of the country and, above all, not of the political, bureaucratic and intellectual elites. This process took place for decades in both parts of Germany, while the Ukrainians are in the process of going through this process as parallel phenomena to the war.

The Donbas status referendums in May 2014 were not officially recognised by the Ukrainian government or any UN member state.

During a two-week trip through Ukraine in the summer of 2016, which began in Lviv and led via Kyiv to Odessa, my brother (Prof. Bernd Henningsen, Humboldt University) and I experienced again and again in conversations with academics and citizens the amazing commitment to Europe and the expectation of being accepted into the EU soon. This incessant confirmation of their European identity was coupled with an astonishing contempt for Putin’s Russia, which has been killing Ukrainian soldiers in the Donbas region since 2014.

The illustrated memorial plaques in Maidan Square in the center of Kyiv did the rest to underline the contempt. But it was the discovery in a Maidan boutique of a roll of toilet paper with the image of Putin on the outer paper and foul remarks in Cyrillic, reminiscent of a famous Goethe line from his play, Goetz von Berlichingen, which illustrated the contempt particularly vividly.

Traveling as a German in Ukraine, which Timothy Snyder describes in his book Bloodlands (2010) as a major region of Stalinist and Nazi terror, is constantly commemorated by memorials to the millions of victims of both regimes, the Holodomor and the Holocaust.  Even in the gorge of Babi Yar, where thousands of the Jews remaining in Kyiv were rounded up and shot by the Germans in September 1941, two monuments stand side by side today. They commemorate the Holocaust and the millions of victims caused by the famine by the Stalinist forced collectivization of agriculture, the Holodomor.

When we asked our interlocutors how they get along with Germans and Russians today, we were regularly surprised by the spontaneous answer. The Germans have come to terms with their past, while the Russians have learned nothing from their history. Putin’s attempt to forcibly revive a defunct empire confirms Anne Applebaum’s characterization of such attempts in her book Twilight often Democracy (2020) as “restorative nationalist nostalgia.”

Census Bureau turns Hawaii population gain into a loss

0

The U.S. Census Bureau overestimated Hawaii’s 2020 population by 6.79%, or 98,812 people, according to an internal review released this month of the 2020 census.

This practically erases Hawaii’s supposed population growth over the past decade and highlights the state’s astronomical cost of living.

According to data from the initial 2020 census, Hawaii’s population increased by 6.52% to 1,455,271 between 2010 and 2020. However, in its 2020 Post-Enumeration Survey Estimation Report, the U.S. Census Bureau determined that the population decreased by 0.26%. 

This decrease for the decade can be attributed to the decline in Hawaii’s population that began in 2016 and continued through 2020, amounting to a net loss of around 22,000 residents. That figure accounts for all births and deaths in the state, and people both leaving and moving to the islands.

Keli’i Akina, Grassroot Institute of Hawaii president and CEO, said the revised 2020 census figures confirm what the institute had suspected all along.

Keli’i Akina

“When the figures came out initially in January, we pretty much thought that there must be a mistake in the data,” he said. “In off-the-record conversations with well-informed census experts, we were assured that updates of the initial data would show a continuing exodus of residents from Hawaii, and that is exactly what happened.”

In six states — Arkansas, Florida, Illinois, Mississippi, Tennessee and Texas — the Census Bureau undercounted the population. The nonprofit Data Center in New Orleans told NPR on Thursday that “a lot of the southern states were hit with disasters, hurricanes while door-to-door work was going on,” which led to many people failing to complete the census. 

According to the Washington, D.C.-based publication The Hill, the miscounts for Texas and Florida likely cost them additional seats in Congress. The census undercounted their populations by 1.92% and 3.48%, respectively.

Meanwhile, in eight states — Delaware, Hawaii, Massachusetts, Minnesota, New York, Ohio, Rhode Island and Utah — the Census Bureau overestimated the populations. 

The revised census report does not discuss why the 2020 figures were inaccurate, but Eugene Tian, the state’s chief economist, said in the Honolulu Star-Advertiser that one reason for the overcounting in Hawaii might be that out-of-state residents who own homes here were unable to return to their primary residences on the mainland because of the coronavirus lockdowns. Peter Fuleky, an economist at the University of Hawaii, said students in Hawaii for the 2020 spring break might also have been unable to return to their homes on the mainland for the same reason.

For Hawaii policymakers, these new statistics are a reminder that the state has incentivized its residents to leave and discouraged prospective residents from moving to Hawaii. You can read the stories of many who have left on the institute’s website here.

Akina said reasons for the exodus include Hawaii’s lack of affordable housing, high taxes, excessive regulations that have choked off business opportunities and the federal Jones Act, which limits shipping competition to the islands and adds to the cost of all goods.

From a tax standpoint, he added, fewer residents means fewer people to pay taxes — yet the Legislature keeps increasing taxes, spending and debt.

“If the Legislature and governor — and the counties — do not act quickly to expand individual liberty, economic freedom and accountable government, I am sure we will all see more of our families, friends and neighbors leaving the islands in the days ahead.” 

Governor urged to review new research before deciding on minimum-wage hike

0

A popular 2010 study claiming minimum-wage hikes do not cause ‘economic shocks’ has just been reanalyzed and overturned 

HONOLULU, May 17, 2022 >> The consensus in Hawaii seems to be that Gov. David Ige will sign HB2510, raising the state’s hourly minimum wage from $10.10 to $18 over the next six years. But maybe new research by one of the nation’s leading minimum-wage researchers will help change his mind.

Economist David Neumark, along with colleagues Priyaranjan Jha and Antonio Rodriguez-Lopez, all of the University of California, Irvine, recently examined a popular 2010 paper often cited in defense of minimum-wage increases and found its methodology to be inadequate and its conclusion erroneous.

As Neumark, Jha and Rodriguez-Lopez explain in their study — “What’s across the Border? Re-Evaluating the Cross-Border Evidence on Minimum Wage Effects,” published just this month[1] — it can be useful to estimate the “economic shocks” of minimum-wage increases by comparing changes in “local economic areas” that span state borders, since this allows researchers to separate the actual effects of minimum wages from other changes in local economic conditions.

However, they say, the 2010 paper examining employment in restaurants and other low-wage sectors used “local economic areas” made up of pairs of counties on opposite sides of state borders, without regard to whether their economies were related. As a result, the 2010 paper concluded that minimum wage increases on one side of the border did not reduce employment there in the targeted sectors.[2]

Neumark’s new study, on the other hand, used a more natural definition for local economic areas — commuting zones that span state borders.

In an email to the Grassroot Institute of Hawaii, Neumark said commuting zones are a much more compelling way to control for economic shocks because they are defined as “common economic areas.” Some of the county pairs in the 2010 study, by comparison, “may be economically unrelated and hence not serve as good controls. Indeed, as the [new] paper notes, some of the authors of the 2010 study have made this very argument.”

Neumark’s new study explains that commuting zones are groups of counties with strong commuting ties based on U.S. Census journey-to-work data. Specifically, they are intended for use as spatial measures of local labor markets, which is “not necessarily the case for county pairs: Even if they are contiguous, two isolated U.S. counties may share little or no commuting and economic activity.”

Thus, Neumark’s new study overturns the results of the 2010 study, finding that the evidence points rather sharply toward restaurant employment declines in response to higher minimum wage.

“In the short run,” Neumark said by email, “the evidence indicates that a 10% increase in the minimum wage reduces employment by 2.4%, and in the longer run by 6.9%.”

Keli‘i Akina, Grassroot Institute of Hawaii president and CEO, said he hopes Ige will take a little more time to study this latest minimum-wage research before deciding on whether to sign HB2510 into law.

“Gov. Ige has qualified economic advisers with whom he can discuss this,” Akina said. “I urge them all to read professor Neumark’s latest research so they can see for themselves that we simply must not enact the drastic wage increase that HB2510 calls for.”

He continued: “There are many ways to help lower-income people increase their purchasing power and improve their standard of living, but increasing the state’s minimum wage isn’t one of them. If the governor wants more information about those other ways, the institute would be happy to offer suggestions, many of which are included in our 2020 report ‘Road map to prosperity: How Hawaii can recover and even excel after the coronavirus lockdowns.’”

Akina hosted Neumark — one of the top 5% of published economists in the U.S. based on the number of his distinct works, citations and other criteria — on his “Hawaii Together” program in March on ThinkTech Hawaii to talk about the minimum wage, which you can view here. Akina also wrote two “President’s Corner” columns on the issue, hereand here.

You can read the institute’s testimony on HB2510 here. And institute policy researcher Jensen Ahokovi produced an outstanding commentary on the issue, “Five myths about the minimum wage.” 
____________

[1] David Neumark, Priyaranjan Jha and Antonio Rodriguez-Lopez, “What’s across the Border? Re-Evaluating the Cross-Border Evidence on Minimum Wage Effects,” IZA Institute of Labor Economics, May 2022.
[2] Arindrajit Dube, T. William Lester and Michael Reich, “Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties,” The Review of Economics and Statistics, November 2010. See also irle.berkeley.edu/files/2010/Minimum-Wage-Effects-Across-State-Borders.pdf.

Questions persist about viability of Honolulu rail

0

By Keli’i Akina

At this point, the one thing we can rely on concerning the Honolulu rail project is the long list of unanswered questions. Among them:

>> How much will it really cost? 

>> How will we pay for its future operations and maintenance? 

>> Will it ever be completed, and if so, when? 

Those were questions we were asking a decade ago, and those are questions that we are still asking now.

In fact, I asked them again this past Monday on my “Hawaii Together” program on ThinkTech Hawaii, while hosting one of the most influential people in Hawaii who might know some of the answers: Natalie Iwasa.

Iwasa spoke in her private capacity as a community activist, certified public accountant and licensed fraud investigator. But she also is a member of the Honolulu Authority for Rapid Transportation, the city agency in charge of building the rail system. Throughout her 17-month tenure with HART, she has become well-known for asking the hard questions about the system that taxpayers want answered. 

Natalie Iwasa

Like many of us, Iwasa is concerned about costs. First, there is the final price tag on construction, which we’ve seen jump from its original price tag of $3.5 billion to its current estimate of nearly $13 billion. As big as that number is, it’s still smaller than the estimate for finishing the project in full.

As Iwasa explained, the new plan involves ending the line at the Civic Center and making other cuts and changes, like eliminating the Pearl Highlands Parking Garage.

“Really, the cost for that garage is outrageous,” she explained. “It was $330 million. I think it was like $200,000 per stall. To put that into perspective, this is actually in the plan. They had asked a contractor who recently built a garage on-island — I don’t know exactly where — but that cost was like $35,000 to $45,000 per stall. You can see HART’s estimate for the Pearl Highlands Garage is like four times as much. It is just outrageous.”

The good news, Iwasa says, is that the wheel and track issues have been resolved and construction is more than half done. While some have said the rail is 75% complete, Iwasa prefers to think of it as closer to 64%, due to some stations that still need to be finished. 

However, with several major hurdles still ahead, including complex construction requirements in the Dillingham area, Iwasa isn’t confident about the cost projections:

“I personally don’t feel comfortable with the numbers because of the history,” she said. “The major contract we have is from Middle Street to now the Civic Center. We’ve seen time and time again how those estimates have been blown out of the water. So if that contract comes in higher than what is anticipated, or there’s something along Dillingham Boulevard with the utility relocation that comes up, it’s just going to really mess things up as far as the finances go.”

Not only does she worry that the additional $1.4 billion being sought for completion of the project won’t be sufficient, she is concerned about ongoing operations costs. Ultimately, those will fall on the taxpayers, as the HART plan depends on taxes for continued funding. 

As a CPA, Iwasa sees a “big flag” in the generous assumptions made about the state’s general excise and transient accommodations tax collections over the next 10 years, which don’t account for policies that could depress tourism, such as laws that resulted in an atypical bump in tax revenues and Honolulu County’s recently enacted Bill 41, which will largely wipe out Hawaii’s economically significant short-term rental market.

Iwasa said she thinks things have improved under HART’s new leadership in terms of transparency, but HART’s lack of forthrightness still is hurting the project. For example, she said, HART last year produced a list of 25 alternatives to the current rail plans, yet it has never been part of a public discussion. 

She also pointed to the agency’s new recovery plan, which would end the rail at the Civic Center and have its riders switch from there to “bus rapid transit.” 

“The plan is to create a lot of feeder buses and take away some of the express buses. Why aren’t we putting that out there, so those people who are planning on riding the rail understand that they’re going to have to get on a bus, off the bus, on the rail, off the rail, on a bus, off the bus? I think those types of things are still not being discussed, and I’m sure there are other examples that people can come up with.”

Of course, there are other questions as well. For example, if the Federal Transit Administration accepts the new plan, when and how will the rail be completed? And at what cost? 

The fact that there is so much uncertainty surrounding the project makes it all the more important that the public stay involved and active. For Iwasa, public participation remains the most vital part of the process.

“I just would really like to stress that people should testify,” she said. “I get it: People are tired of feeling like they’re not being heard. But it is so important, it is critical that you keep telling your decision-makers, your elected leaders, what you think. And, I tell you, it’s going to stay on the record and it’s so important. So that would be, I think, the most important comment that I can make.”

To which I would add: Hear hear. I couldn’t agree more.
__________

Keli’i Akina is president and CEO of the Grassroot Institute of Hawaii.

More Bills in the Home Stretch

0

In last week’s column we started a list of bills that the Hawaii Legislature has passed up to the Governor for action.  Here’s a list of some of the eyebrow-raising bills that have gone to the fifth floor.

Senate Bill 3040 is a bill sponsored by the Department of Accounting and General Services, which handles a lot of the purchasing for the State.  It wants to build an automated procurement system that is electronic, accounting-oriented, multi-module, and data-based that integrates procurement activities from solicitation to contract management.  So far, so good; such a system sounds way better than the manually intensive processes we have now.  But part of the bill requires the procurement office to collect a transaction fee for the use of the procurement automation systems to cover the costs.  Which seems to mean that if I am selling something to the State and I want to get paid, I need to pay the State for the privilege of getting paid.  Even better, if I want to put in a bid so that the State might buy my products or services, I need to shell out a few bucks for the privilege of offering my wares, whether or not they get purchased.  Excuse me, but we already tax the businesses who are selling things to the State.  This bill, it seems, will raise the costs of things that the State purchases even more.

House Bill 2179, sponsored by the Department of Taxation, allows the Department to convert tax liens to civil judgments if 365 days pass from the date of recording with no response or action by the taxpayer.  Why do they want to do this?  Recall that back in 2009, lawmakers adopted a 15-year statute of limitations for the collection of taxes, meaning that if you owe back taxes and the Department hasn’t managed to beat the money out of you in 15 years, the Department can stop searching for your money and leave you alone.  (The comparable period for federal taxes is ten years.)  But if this bill becomes law, a tax lien can be converted to a civil judgment just before the 15th year expires.  Civil judgments have their own life of ten years and can be extended for another ten years.  Meaning that the Department can do an end run around the 15-year statute of limitations and keep going after a hapless taxpayer for up to 35 years!  Unless, of course, the taxpayer takes “action” or makes a “response,” with neither term defined in the law.

House Bill 137, another 2021 bill that got dusted off this session, deals with the county liquor commission and its powers to investigate liquor licensees.  There’s a State tax on liquor sales, and current law says that if a liquor commission investigator finds out that liquor tax hasn’t been paid the investigator can rat out the licensee to the Department of Taxation.  Under the bill, that will no longer be legal and the Department of Taxation will need to use its own investigative resources to root out liquor tax scofflaws.  I wonder if that means the Department of Taxation will need to be sending investigators to the local bars and buying drinks, at taxpayer expense, “to figure out whether they’re paying their taxes.”  In any event, it seems a waste to send law enforcement investigators in and prevent them from reporting any observed violations to another law enforcement agency.

And, last but not least, Senate Bill 2379 allows the Department of Taxation’s Special Enforcement Section to examine any sector of the state’s economy, initiate civil investigations, and use enforcement and education to deter taxpayer noncompliance.  These are tasks entrusted to the Department generally, so why call them out specifically for this one piece of the Department?  The answer is money, of course.  The Special Enforcement Section can spend money in the Tax Administration Special (slush) Fund, which we have written about before.  That fund, which is fed by certain tax collections and fines, became a cash cow for the Department, so much so that the Legislature raided $15 million from the fund last session.  The Department, like many of the other state departments, apparently feels that it is entitled to grab some of the tax collections and use them for itself before the Legislature and the other departments get their grubby mitts on that moola.  This is a trend in government behavior that we should be reversing, not fostering.

Again, June 27 is the next magic date – that’s when the Governor has to announce his “intent to veto” list.

Lockdowns without limits can happen again if changes not made

0

By Melissa Newsham

It has been more than two years since Hawaii’s coronavirus restrictions were put into place, and as they have slowly been lifted, life in the islands is finally starting  to resemble the pre-pandemic “normal.”

We must remember, however, that these restrictions can easily be reinstated with the stroke of a pen because our state’s emergency-management law has not changed. 

This could all happen again unless necessary checks are put in place. 

Melissa
Newsham

Understandably, many seem to want to just forget about the crippling economic hardship, social isolation, ideological polarization and general uncertainty of the last two years. 

Legislation has been proposed that would establish limits on the governor’s powers durng an emergency. However, it will all be for naught if it doesn’t ensure that so-called “emergencies’’ cannot be endlessly or arbitrarily renewed. 

Throughout the lockdowns, the Grassroot Institute of Hawaii has been calling on our legislative leaders to put the brakes in place that would prevent the governor from perpetually renewing emergency orders without legislative approval.

Hawaii’s COVID-19 restrictions are waning, but our emergency-management statute remains fundamentally the same. 

So we should not feel like party poopers when the state still has the same tools in hand to shut down everyday activities — including schools and people’s livelihoods — for extended periods with virtually no limits. 

We should celebrate the lifting of mandates and be encouraged by the economic recovery that is underway. 

But let us continue to advocate for a better balance between the executive’s emergency powers, our freedoms and government accountability.
________

Melissa Newsham is a research associate with the Grassroot Institute of Hawaii.

Emergency powers reform would be crowning achievement for Gov. Ige

0

By Keli’i Akina

The 2022 Legislative session is officially over, and now we turn to the governor.

Which bills will he sign right away? Which will he veto? Which will he allow to become law without his signature?

For a full analysis and discussion of the 2022 session, I urge you to attend the Grassroot Institute of Hawaii’s upcoming legislative wrap-up seminars, May 16, 17 and 18 in Honolulu, Kahului and Kailua-Kona, respectively, featuring three of my institute colleagues: Malia Blom Hill, Ted Kefalas and Joe Kent.

However, for the benefit of Gov. David Ige, who has some big decisions ahead of him, I have some advice. Specifically, here are three bills he should sign immediately and two that he should veto:

SignSB3089the emergency powers bill.

Since the earliest days of the coronavirus lockdowns, the Grassroot Institute has urged that Hawaii’s emergency management law be reformed. As we have all witnessed during the past two years, the law is vague in its discussion of emergency extensions and gives too much unchecked power to the executive. 

SB3089 would correct those problems by insisting that the powers exercised must be consistent with the state Constitution, that any suspension of laws must be justified and that there should be some protection against the suspension of the state’s open-records law. Most critically, it would enable the Legislature to terminate an emergency period by a two-thirds vote. 

I hope that the governor will recognize the importance of restoring the constitutional balance of powers and sign SB3089. Though the COVID-19 emergency is ending, we must be prepared to handle future emergencies. Reforming the emergency powers law is essential to our future.

VetoHB2510the minimum-wage bill.

Despite the pleas of business owners warning that such a steep wage hike could force them to close their doors, the Legislature went ahead and approved one anyway, in the form of HB2510. 

The final compromise on the bill seeks to nearly double the existing minimum wage within six years, taking it to $18/hour by January 2028. Though it also would increase the tip credit over the same period and make the earned income tax credit permanent, that would not be enough to offset the damage this bill will likely cause.

As the Grassroot Institute explained in its testimony on this bill, such a wage hike will hurt local businesses while doing little to help working families. If the point is to make Hawaii more affordable, then HB2510 is likely to have the opposite effect, operating as an anchor on our economic recovery. 

The political pressure to enact this bill is significant, but the governor should look at the research on the minimum wage, veto this bill and choose a more effective way to help improve purchasing power in our state.

SignSB514the taxpayer refund.    

It looks like Hawaii taxpayers are going to receive rebates of $100 to $300, but I am disappointed that the proposed refund isn’t greater. Given Hawaii’s current $4 billion surplus, a refund closer to $1,000 each would easily have been possible. 

However, $300 for single filers with an adjusted gross income under $100,000 and joint filers under $200,000, and $100 for those with an income above each threshold is definitely better than the earlier suggestion of $100 for all. 

The governor deserves praise for suggesting the taxpayer refund in the first place, and I can’t imagine that he won’t sign this bill. After the challenges of the last two years, Hawaii’s taxpayers deserve a break.

VetoHB1147the HTA funding bill.

There is a lot to criticize in the last-second rush to fund the Hawaii Tourism Authority. 

Not only did the Legislature throw together two “gut and replace” bills with different approaches to oversight and funding of the HTA, it then discarded both in conference committee, leaving the tourism agency with no funding at all. At the last possible moment, a capital improvements bill from 2021 that never even mentioned the HTA was revived, “gutted” and “replaced” with a $60 million appropriation for the agency.

Not only was the process to pass HB1147 flawed, it continues the questionable policy of using taxpayer funds to support the visitor industry. Tourism can pay for its own promotion without state funds. Gov. Ige should make a major policy statement by vetoing HB1147.

SignHB1837the “Yes in My Backyard” bill.

An earlier version of HB1837, dubbed the “Yes In My Backyard” bill, would have required that the counties identify and remove their barriers to affordable housing. Its final version seeks only to create a working group that would report on efforts to reduce county barriers to affordable housing and propose legislation. 

Admittedly, this would be just a small step towards dismantling the laws and regulations that make housing more expensive in our state, but it would be a step in the right direction.

There are other important bills that Gov. Ige will be considering, but I hope he pays special attention to the ones listed above. 

If you want to encourage him to do so — or if you want to voice your opinion on any pending legislation — you can write to him using the Grassroot Institute’s action page. It’s an easy way to make your voice heard. 

After such a busy legislative season, I am thankful to all of you who participated in the process, whether you sent a letter, made a call or just supported those who did. 

Let’s keep working together to make a better, more prosperous Hawaii.
_____________

Keli’i Akina is president and CEO of the Grassroot Institute of Hawaii.

Bills in the Home Stretch

0

The Hawaii Legislature is done for the year.  Its last day for this session was May 5th.  It has done all its work on new laws for this season.  Some of the bills it finally passed have already been signed into law.  Others are awaiting the Governor’s action.  Now the important deadlines are June 27, 2022, when the Governor needs to give notice of intent to veto a bill, and July 12, 2022, which is the deadline for the Governor to sign or veto any bills.

Some of the more consequential bills that now await the Governor’s action:

Senate Bill 514 proposes to give every resident a tax refund.  The refund amount is $300 per exemption (which includes self, spouse, and dependents) or, for those households making $100,000 or more, $100 per exemption.  To get the refund, a resident needs to file a 2021 income tax return on or before December 31, 2022.  Many residents have already filed this return.  If you are on extension, don’t delay too long!  Also, the bill drops $300 million into the State‘s pension program and $500 million into the rainy day fund.  We’ve previously covered this bill in a Frivolous Fable.

Senate Bill 3201 fundamentally changes the way tax-exempt organizations are treated under the GET Law.  For a nonprofit to be taxable under federal standards, it has to be conducting a business unrelated to its tax-exempt mission.  For a nonprofit to be taxable under the GET, it only needed to be raising money.  This bill will adopt the federal standards for the GET, making it easier for nonprofits to keep track of the rules.  We wrote that this bill would be a game-changer for nonprofits.

House Bill 2511 authorizes a $600 million cash infusion into our Department of Hawaiian Home Lands,  To many of the Native Hawaiians who had been patiently waiting for Hawaiian homestead lands for years or decades – more than 28,700 are on the list now – this historic funding seems to be a welcome relief.  We pointed out that DHHL experienced some inability to spend down the money it was given; specifically federal funds.  As we wrote earlier, we hope that DHHL can put that questionable past behind and do some good for the Native Hawaiians who benefit from the Hawaiian Homes Commission Act of 1920.

Senate Bill 3289 establishes the Hawaii Retirement Savings Program, a concept heavily pushed by AARP this year.  The idea is for the State to establish a program that private sector companies and employees can opt into.  For small employers that have to pay oodles of money to keep their own employee retirement plan going, it would be a chance for them to ditch their current plan and adopt the State plan, or for small employers who had given up on retirement plans for their workers because of the associated costs, it would be a chance for them to offer retirement plan benefits once again.

Senate Bill 2475 gives an exemption from the GET for stevedoring services, as well as wharfage and demurrage fees that are paid to the Department of Transportation.  These fees are unique to the industry of transporting goods by sea.  Some time ago, we noted that the federal government came out with an executive order against detention and demurrage charges, and argued that we really shouldn’t be taxing transportation of goods when we depend on that transportation for our very existence.  This bill, by knocking the GET off these fees, should be a step toward lowering our stratospheric cost of living.  It also promotes more equality between water and air transportation of goods because federal law prevents us from applying our GET to air transportation.

We’ll be covering more of these bills in articles to come.

To GET or Not to GET – SVOG and RRF Are the Questions

0

The COVID-19 pandemic made history both here and abroad, but for different reasons.  Here, it was remembered not only for the 1,400 lives it claimed, but also for the businesses it hurt or ruined.  Our experience was similar to other States across the country, and our federal government stepped in to give us some economic assistance that, we hoped, would blunt the impact of stay-at-home orders and forced business closures.

That economic assistance came in the form of some very different federal programs.

Everyone got a couple of rounds of stimulus checks.  The Feds and we said it’s not income and we won’t tax it.  No income tax, no GET.

The unemployed got some extra unemployment compensation.  The Feds didn’t tax it, up to $10,000 in 2020.  We did.  We made people pay income tax, but not GET.

Then came the forgivable loans:  PPP (Paycheck Protection Program) and EIDL (Economic Injury Disaster Loan) is what they were called.  They initially were loans to affected businesses, but the businesses obtained forgiveness of all or a part of the loans, meaning that the businesses could keep the money.  For tax purposes, loans you get aren’t income because you need to pay the money back.  But when the debt is forgiven, the amount of forgiven debt is income.  The Congress said that PPP forgiveness doesn’t count as income but EIDL forgiveness does.  So, we said that for income tax purposes we would do the same thing.

And then, for GET we said (in Tax Information Release 2020-06):  “The general rule is that amounts received by a business that replace income are subject to GET.  Thus, grants or other payments that replace or supplement income are normally subject to GET.  However, in light of the severity of the economic impact of the COVID-19 pandemic, GET will not be imposed on payments received under PUA, loan amounts forgiven under PPP, and EIDL Grants. These amounts will be treated as exclusions from gross receipts and should not be reported on GET returns.”

Usually, “severity of the economic impact” is not a legitimate reason why laws that apply to other people or in other situations independently of economic consequence don’t apply here.  If our lawmakers pass laws that modify the rules, that’s fine.  Or if they pass laws that say that the agency can consider economic impact, perhaps among other things, and grant relief from this or that legal requirement, that’s fine too.  Or the Governor could come in and suspend the laws because of the emergency, which he had been doing on a regular basis with emergency proclamations.  But no laws were passed modifying the rules or granting the Department of Taxation the authority to bend the laws, and the Governor’s proclamations didn’t suspend the tax code (except to shut off the flow of TAT money to the counties).

Now, we have restaurants and bars getting grants from the Restaurant Revitalization Fund (RRF).  And we have entertainment venues getting grants under the Shuttered Venue Operators Grant (SVOG) program.  The Department of Taxation has yet to officially tell us whether the GET will take a bite out of these grants, although Department staff have informally said that they would be taxable because of the “general rule” quoted above.

But what about severity of the economic impact?  Does that count anymore?  Restaurants and bars getting RRF money, or entertainment venues getting SVOG dollars, need to show pandemic-related revenue loss before the Feds will give them money.  Does that matter at all?

What say you, Department of Taxation?  To GET or not to GET, that is the question today.

Are we on the verge of a historic change in state tourism policy?

0

Photo by Charley Myers

By Keli’i Akina

It looks like we could be on the verge of a new tourism policy for Hawaii.

Legislators have been dickering this past week over how much money the state tourism agency should receive and under what conditions. Ultimately, however, the state Hawaii Tourism Authority might receive no funding at all.

Which would be ideal.

As Allison Schaefers reported yesterday in the Honolulu Star-Advertiser, Hawaii legislators strongly disagreed over two bills that would fund the HTA.

One group disliked the micromanaging that HB1785 would impose on the HTA, while other lawmakers opposed the creation of a new special fund and commission that were central to SB775.

Both bills passed each chamber, but neither actually made it to a conference committee hearing. As of today, HB1785 is dead, while SB775 can still be revived if the Senate agrees to the House’s amendments by May 5.

With no appropriation, the fate of the HTA is uncertain. The House and Senate have effectively defunded the HTA by leaving it out of the final version of this year’s budget bill.

If this turns out to be the final statement on the HTA’s future, no tax dollars will be spent on destination management or advertising, and the industry will be on its own. Instead of propping up an agency that either micromanages tourism or uses tax dollars to promote it, the state government will be out of the tourism business altogether.

To be clear, defunding the HTA should not be misconstrued as opposition to tourism. Rather, it is a philosophical statement about the state’s practice of supporting and promoting — and increasingly “managing” — one specific commercial enterprise over others.

No matter how important tourism might be to our economy, it is not the state’s job to be favoring specific companies or business sectors. Moreover, the tourism industry, especially, is quite capable of paying its own bills, and has been for a very long time.

Just last month, U.S. visitor arrivals to Hawaii came roaring back after two years of coronavirus lockdowns, and the tourist numbers are sure to go higher once visitors from Japan are back in the mix.

Of course, given the statements made to the Star-Advertiser by tourism officials about the importance of the HTA, the Legislature might not be finished with state-funded tourism. However, if funding is restored, that would present us with the irony of the state promoting visitor arrivals even as the counties attempt to limit or “manage” them.

Whatever the Legislature decides, Hawaii’s contradictory approach to tourism is not viable in the long-term.

As my colleague Joe Kent, Grassroot Institute of Hawaii executive vice president, said yesterday in the Honolulu Star-Advertiser, the Legislature has been asking the wrong questions about the HTA’s future.

“The real question,” he said, “is whether the HTA should be funded at all, since it would save tax dollars and foster economic sustainability to let the tourism industry pay for its own advertising and management.”
___________

Keli’i Akina is president and CEO of the Grassroot Institute of Hawaii.