This article was originally published Aug. 19, 2022 in the Hawaii Filipino Chronicle.
By Keli‘i Akina
With inflation soaring in our already-expensive state, wouldn’t it be nice to get a discount on a few of life’s necessities?
That might actually happen, if some of the candidates in the current election cycle get elected.
Finding popularity in an idea that has been kicking around for decades, the candidates have been talking about exempting food and medicine from the state general excise tax — and I’d like to encourage them to follow through on the idea if they make it into office.
Why exempt food from the GET? Because even before inflation drove grocery costs up by 8.7% this year alone, Hawaii residents were spending considerably more of their budgets on food than the residents of just about anywhere else in the U.S.
Given that Hawaii’s GET can be as high as 4.712% — when you include the surcharges imposed by the counties — an exemption for food would help alleviate some of the pain caused by Hawaii’s ever-increasing prices.
The GET, of course, is a regressive tax, which means it falls heaviest on those who can least afford it. Offhand, that would make it seem like a good idea right there to exempt food from the GET.
However, a prominent state official recently said a GET exemption for food wouldn’t help Hawaii’s poorest residents, since purchases with food stamps already are exempt. But this misses the larger point: Not everybody uses food stamps, and for most of Hawaii’s residents who don’t, every dollar counts. That’s why we like big-box stores, discount cards, coupons and kamaaina deals
Let’s face it: Hawaii is one of only 13 states that levies a sales tax on groceries. A GET exemption for food is one way policymakers could do something constructive about the large role that taxes play in Hawaii’s high cost of living. As for medicine, our prominent state official noted that prescription drugs also are already exempt from the GET. But there are many over-the-counter drugs that people buy for legitimate health-related reasons, and these are not exempted. If we want to help people save a few more dollars during these rough times, exempting all medicine products would be a way to do it. Nine other states and the District of Columbia do so, while a 10th state taxes OTC drugs at a lower rate.
In fact, not only should Hawaii lawmakers help Hawaii families save money on food and medicine, they should exempt medical services as well, as nearly all other states do.
Hawaii hospitals and medical groups don’t have to pay the GET, but private practice physicians do. Combined with the local cost of living, the high price of doing business in our state and the fact that the GET cannot be passed on to Medicare patients, the tax on physician services makes it very difficult to run a successful medical practice in Hawaii.
Physicians themselves have cited Hawaii’s tax on medical services as a contributing factor in their leaving the state to practice elsewhere. Hawaii already is suffering from a doctor shortage, overstressed hospitals and delays in access to care. The last thing we need is a tax that drives away qualified physicians and shuts down medical practices.
Most other states have already seen the wisdom in exempting groceries and medical services from their sales taxes. Will this be the election season that leads to Hawaii doing so as well?
Keli‘i Akina is president and CEO of Grassroot Institute of Hawaii.