Big tax cut was legislative highlight, but killing tax hikes important too

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With so many great bills having been approved by the 2024 Legislature, it’s easy to forget that success also can be measured by the types of bills that were defeated.

Yes, I am thrilled that my colleagues and I at the Grassroot Institute of Hawaii were able to help pass excellent legislation — such as Gov. Josh Green’s proposal to cut income tax payments for the median-income family of four by 69% and save Hawaii taxpayers in general about $5 billion by 2031.

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But I am happy that we played well on defense too, helping to defeat many measures that would have harmed Hawaii’s economy and added to our already high cost of living. These included numerous proposed tax hikes, such as the so-called carbon tax embodied in SB2525.

Keli‘i Akina
Keli‘i Akina

Proponents of that tax tried to sweeten the deal with a tax credit, but our legislative testimony emphasized that a tax credit wouldn’t even begin to address the economic impact of the higher prices we would have had to pay for energy and fuels.

Another bad idea we helped kill was HB1537, a proposed constitutional amendment that would have allowed the state to levy a property tax “surcharge.”

In our testimony and in other forums, we pointed out that this proposed tax would not only have usurped county authority, but also added to the financial burden of Hawaii homeowners at the very time our counties were searching for ways to offset soaring property taxes due to increased property valuations.

Other concerning tax proposals were HB2364SB3053 and HB2629, all of which proposed increasing the state’s conveyance tax, which is applied when realty or interest in realty is sold.

Two other measures — SB2044 and HB1628 — sought to impose the conveyance tax on transactions in which the controlling interest of a business with real property is transferred.

Grassroot pointed out that the latter bills were fraught with practical problems, while the former threatened to increase housing costs and discourage adaptive-reuse projects, which is when commercial buildings are sold for conversion into residences.

Thankfully, none of these bills made it to the governor’s desk.

Another tax bill that met a well-deserved death was HB2781, which wanted to make permanent the current so-called temporary county surcharges on the state general excise tax.

As I’ve said many times before, there’s nothing so permanent as a temporary tax. However, even though we can count the failure of this particular bill a win, I suspect we will see this idea introduced again next year. After all, the Honolulu rail, which was the impetus for this tax surcharge in the first place, is still far from being finished and continues to push the city deeper and deeper into a financial black hole.

Two more tax bills we helped defeat, HB2081 and HB2406, sought to hike our already high taxes on tourists, either by increasing or adding a surcharge to the state transient accommodations tax, which — case in point — itself started out as a temporary tax.

As we’ve done in the past, we emphasized to our legislators that residents also pay the TAT when they travel within the state or simply enjoy a staycation. We also shared research showing that such taxes decrease visitor spending, which means local businesses and their employees also are penalized by those taxes.

Other bills that Grassroot successfully advised against on the grounds they would do more harm than good included a paid family leave program, as proposed in SB2474 and HB2757; and a variety of rent control bills, namely SB2762HB2165 and SB2908.

Finally, we weighed in against the state’s effort to solve its property insurance crisis through tax hikes and a special insurance stabilization fund, as proposed in SB3234 and HB2686.

We oppose tax hikes in general, but we also were concerned about the how the meausures might have affected the state insurance market, and the Legislature was wise to shelve these bills until more can be learned about their costs, feasibility and effectiveness.

I assume the intentions behind all these bills were generally good. Some of them sought to fund laudable programs, such as education or infrastructure initiatives. Others were introduced in response to the difficulties being faced by Maui residents in the wake of last year’s devastating wildfires.

However, it is still important to stop such bills. When Grassroot plays defense, our biggest concern is the effect they will have on the freedom and prosperity of our state.

We are always looking to find common ground with lawmakers and others to promote a better Hawaii, but our principles remain paramount.
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This commentary was Keli‘i Akina’s weekly “President’s Corner” column for May 11, 2024. If you would like to have his columns emailed to you on a regular basis, please call 808-864-1776 or email info@grassrootinstitute.org.

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