Hawaii Leaders Seeking Justice; Tax Foundation Corrects Report on Hawaii’s Tax Rates; U.S. Department of Justice Settles $22.6 Million Whistleblower Case Negotiated by Hawaii Law Firm

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Hawaii Leaders Seeking Justice

The Washington DC based Justice Center has been studying Hawaii’s justice system.


Some of the news highlighted serious problems in Hawaii’s judiciary system:

Crime and arrests are declining but more people are in prison.

That is because:

  • Over the last 10 years, Hawaii’s pretrial population has more than doubled;
  • More prisoners are denied parole, mostly because of program bottlenecks.
  • Parole violators are being held longer but without supervision.

Gov. Neil Abercrombie has organized a task force, which includes lawmakers, judges and the governor’s administration, to review the data and come up with proposals to correct the problems.

The group has already met two times of a total of four meetings planned and will issue a final report in January.

Tax Foundation Corrects Report on Hawaii’s Tax Rates

The Tax Foundation based in Washington D.C. recently reported that Hawaii has a 4 percent sales tax and that it is among the lowest tax rates in the country.

Only there is one big problem with this report: Hawaii has no sales tax. In fact Hawaii is the only state with a gross general excise tax, which taxes goods at every level of transaction.

If Hawaii did have a sales tax, it would equal to at least a 10 percent – and some economists estimate it is even higher.

Overall, Hawaii has one of the highest tax burdens in the nation.

And as Lowell Kalapa, president of the Tax Foundation of Hawaii notes, the tax is on the business, not the consumer.

Kalapa called the report “misleading” and uninformed and contacted the national Tax Foundation.

Taxpayer advocates have complained that news that Hawaii has one of the lowest tax rates – when in fact just the opposite is true – allows lawmakers to justify additional tax increases.

The Tax Foundation did in fact issue a correction dated September 30. It reads:

Our recent report on state and local sales taxes has generated enormous media attention and interest. In most states, consumers pay not only a state sales tax and a local one, and our calculations allow an apples-to-apples comparison of combined sales tax rates across the country.

There are two caveats, and regrettably, they were left out of the initial release of the report (we corrected the omission shortly after the report’s release). One affects just one state: Montana, which has no state sales tax, does have resort sales taxes in select towns. Unfortunately, collections data is not available from those towns for us to calculate a rate.

The other caveat is much more important, and affects Hawaii, New Mexico, South Dakota, and Wyoming. These states have broad-based sales taxes that are so unlike other states’ sales taxes that many experts in those states consider them different kinds of taxes altogether. For example, most states do not apply the sales tax to services or many business-to-business transactions, but those four states sweep most of those in.

Earlier this year, Professor John Mikesell of Indiana University estimated that sales taxes in the United States on average apply to about 40 percent of the economy. That is, 40 percent of personal income is subject to sales tax.

In the four states noted, the percentages are significantly higher: New Mexico (60% included in tax base), South Dakota (67% included in tax base), Wyoming (99% included in tax base), and Hawaii (108% included in tax base).

Hawaii in particular is astonishing as that means the tax base is larger than the economy, resulting in multiple taxation of the same product or service.

Such nuances are difficult to convey in a table or a map but are important to remember when doing interstate comparisons.

So while Hawaii’s combined rate is a low-sounding 4.35%, the sales tax burden on residents is the third highest in the country ($2,043 per person per year, as against an average of $1,005).

U.S. Department of Justice Settles $22.6 Million Whistleblower Case Negotiated by Hawaii Law Firm

On Thursday, the U.S. Department of Justice agreed to settle a multi-million dollar case initiated by Hawaii’s Galiher Law Firm in partnership with an Ohio firm advocated for whistleblower David Magee.

A statement from Galiher said: “Science Applications International Corp. (SAIC), one of the country’s largest defense contractors; its subcontractor, Applied Enterprises Solutions; and three individuals reached settlements with the Department of Justice and whistleblower David Magee totaling $22.6 million to resolve a case involving bid-rigging at NASA’s Stennis Space Center in Mississippi. (In January of this year, another Defendant, Lockheed Martin, agreed to a $2 million settlement.)”

In 2006, the Galiher Law Firm and Helmer, Martins of Cincinnati initiated the False Claims Act lawsuit for whistleblower Magee. They filed the lawsuit in the U.S. District Court in Gulfport, Mississippi. Three years later, the Department of Justice joined the lawsuit.

The suit claimed that a government contract relating to the new National Center for Critical Information Processing and Storage at Stennis was the subject of bid-rigging.

“The allegations focused on a conspiracy to steer the contract to SAIC, which received confidential information that was not provided to competing bidders. The contract had a potential value of $3.2 billion,” a Galiher statement reports.

“Government fraud is going on all the time and costs honest, hard-working taxpayers billions and billions of dollars,” explains Magee’s attorney Gary Galiher. “We need more brave citizens like Mr. Magee who know what’s going on to come forward.”

President Abraham Lincoln signed The False Claims Act in 1863, and today, it is still the tool to combat fraud by government contractors.

The Department of Justice has recovered more than $7.8 billion in False Claims Act cases since January 2009 with the help of Whistleblowers, Galiher reports.





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