For the Governor, Lots of Work Left to Do This Summer; Got Communication Devices? Lawmakers Want to Tax Them; Is the Other Shoe Dropping for Local Businesses?

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For the Governor, Lots of Work Left to Do This Summer

Hawaii Gov. Neil Abercrombie signed just over 60 bills and vetoed two bills so far this year, with an estimated 225 bills left to review.


The governor, who is in his first term, has until July 12 to either sign, veto or let the bills become law without his signature.

If he does veto additional legislation, the Hawaii State Legislature has the option to come back into special session to override any vetoes. However that requires two-thirds support from both Houses, and with Democrats making up the vast majority of the members in the House and Senate, and a Democrat in the Governor’s office, this kind of conflict is highly unlikely to happen publicly.

Got Communication Devices? Lawmakers Want to Tax Them

Since July 1, 2004, Hawaii has imposed a 66 cent monthly state tax on all cell phone users in addition to other cell phone taxes.

For seven years, this fund has paid for the set up and now operation of the 9-1-1 tracking system, which enables 9-1-1 operators to pinpoint the geographic location of callers.

The theory is that the tracking system, which was already was in effect for landlines before 2004, would help emergency responders get to those in distress and danger more quickly – and ensure they are found.

There was enough surplus in the fund for legislators to raid the fund this year. But lawmakers, who are looking for additional revenue sources, aren’t satisfied that they are collecting enough tax.

Legislation sitting on the governor’s desk for his consideration will allow a “Enhanced 9-1-1 Board” of 13 members to impose a new tax of an undetermined amount on all electronic communication services, such as pagers and voice over internet communication services where the users pay a monthly fee.

The new charge, should the governor approve HB 1000, will be designated for neighbor island and rural areas that don’t have adequate phone service. However, as anyone knows who follows this legislature, lawmakers can raid special funds at any time for any purpose such as balancing the state budget.

The bill passed unanimously in the House (49-0 with two absent) and with just one Senator, Sam Slom, (R-Hawaii Kai-Diamond Head) voting in opposition.

The bottom line with this legislation: Anyway the public has communication, lawmakers want to tax it.

Is the Other Shoe Dropping?

Hawaii’s businesses already struggling with the impact of a weak economy and high taxes and mandates on their sales of products and services are waiting to hear whether the governor will sign HB 974.

The bill will eliminate state general excise tax exemptions for several of Hawaii’s businesses and business sectors, and thereby increase the cost of doing business in Hawaii and the cost to consumers.

Lawmakers wanted the revenue to balance the state’s budget and cover a $1.3 billion budget shortfall for fiscal years 2012 and 2013.

The GE tax exemption elimination is the single biggest revenue enhancer for the state this session, with the legislation expected to bring the state $400 million.

But there are several legal and business questions related to the legislation, which is set to impact the airlines and shipping industries and the construction sector.

For example, if people have signed a contract for a delivery of goods, but the delivery does not take place until after July 1, 2011 when the law is expected to take effect, would the tax hike apply?

The amount of money at stake is substantial. On Oahu for example, it could add another 4.5 percent in taxes to the cost of construction projects.

Business owners interviewed by Hawaii Reporter say they are just becoming aware of how serious and negative the elimination of these tax exemptions would be and how it will put local businesses at a disadvantage when competing with mainland or internet-based companies that don’t pay general excise tax.