The ConAm Returns
By Tom Yamachika, President Two years ago, we as voters were inundated with impassioned arguments on both sides of a proposed constitutional amendment (“ConAm” for short). The amendment would have given the State the power to impose a surcharge on real property tax, ostensibly to fund teacher pay raises. The Hawaii Supreme Court ultimately voided the ConAm as vague and misleading. It’s now another election year, and bills for ConAms are in the legislative hopper to monkey with the real property tax yet again. One bill proposing to do that is HB 2671, which would give “concurrent authority” to the Board of Education together with the counties to levy real property taxes. The Board would need to exercise its authority for the purpose of funding teacher compensation. What does concurrent mean in this situation? Assuming that the bill drafters didn’t intend to require the Board and the Counties to agree before any tax increases pass, the effect of the amendment would be that either the Board or the Counties would be able to modify property tax rates whenever they wanted to. When the previous ConAm was being debated, the Counties all brought up that they didn’t want their primary revenue source to be altered. The Counties all borrowed money on the bond market, and they said their creditors would be upset if they lost control over their primary source of repayment. So, they are likely to have conniptions over this ConAm as well. If this bill passes, then, look for the battle lines to be drawn the same as last time. Another bill to watch out for this session is SB 2074. This ConAm would authorize the Legislature to establish “a surcharge on real property taxes for real property located near rapid transit stations to fund infrastructure improvements in those areas.” Notice that the surcharge is on real property taxes “for” real property located near rapid transit stations, not on real property taxes “on” real property located near rapid transit stations. The State is looking to grab some money to put into infrastructure improvements near rapid transit stations, but it isn’t looking to get it simply from the real property to be benefited. The surcharge could apply to all real property anywhere in the State, and there are no limits on what the surcharge could be or on what kinds of property could be affected. In that respect, it’s worse than the 2018 ConAm because any and all real property can be surcharged, not just “investment real property” that the 2018 ConAm targeted. On January 28, the Senate Judiciary Committee held a public hearing on SB 2074. As of press time, its decision on the bill had not been released. The public hearing elicited testimony from the State Office of Planning (supporting the intent of the bill), the Tax Foundation of Hawaii (with comments), the Building Industry Association (in strong support), the Hawaii Association of Realtors (in strong opposition), and one individual. The individual’s testimony in opposition was short and sweet: “The State is Getting to [sic] Greedy.” Will either of the ConAm bills make it to the 2020 general election ballot? The drama is still unfolding.
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NEWS RELEASE from the Grassroot Institute of Hawaii Contact Mark Coleman, 808-386-9047 or [email protected]. Hawaii GET adds $220M to healthcare costs
Exempting medical services would help patients and stem the doctor shortage HONOLULU, Jan. 30, 2020 >> Exempting medical services from Hawaii's general excise tax would result in a $222 million tax cut for consumers and healthcare professionals, according to a new study commissioned by the Grassroot Institute of Hawaii. Economic research firm John Dunham & Associates of New York ran the numbers and found that healthcare spending for medical services in Hawaii totals about $9 billion, of which the for-profit private sector accounts for $5 billion. An exemption from the state's 4% GET would save private, for-profit medical providers approximately $200 million. Waiving the GET surcharges imposed by the counties would save an additional $22 million more. The savings from the state-level exemption would equal about $5,275 per each of the sector's approximately 38,000 full-time workers. This is equivalent to 6.7% of the average medical service workers's wage and 5.8% of current GET collections. The study noted that Hawaii has a doctor shortage of an estimated 820 full-time equivalent physicians, up from 797 last year. If the exemption were applied selectively to only areas deemed to have acute shortages, the savings would be $72 million, or about $1,920 per for-profit medical service worker in the state. The study said that if a GET exemption on medical services incentivized at least 820 new physicians to set up practice in Hawaii, employment in medical services would increase by about almost 4,000 full-time positions, assuming that each individual physician has a 3.8-person support staff. This in turn would generate an additional 4,000 supplier and induced jobs, $1.4 billion in new economic activity, and about $67.3 million in taxes, which would cover more than a third of the cost to the state of the GET exemption for medical services. The study pointed out Hawaii already exempts other services from the GET, including aircraft maintenance and leasing, convention expenses, petroleum refining and orchards. "This means," it said, "that the state of Hawaii uses its tax code to encourage the development of orchards, but discourage the provision of medical care." Keli'i Akina, president and CEO of the Grassroot Institute of Hawaii, said, “This compelling new research makes it more clear than ever that there are positive steps our state and county governments can take to rollback healthcare prices. Exempting medical expenses from the state GET would be an easy first step to help both Hawaii's consumers and physicians.” The report, "How the state GET affects healthcare costs in Hawaii," can be downloaded from the Grassroot Institute website at www.grassrootinstitute.org. ### The Grassroot Institute of Hawaii is an independent 501(c)(3) nonprofit research and educational institution devoted to promoting individual liberty, economic freedom and limited, accountable government. To arrange an interview with Keli’i Akina, its president and CEO, please call Mark Coleman at 808-386-9047 or email [email protected] WMTA Shares these commentaries, without taking a position unless otherwise noted, to bring information to our readers To view the archives of the Tax Foundation of Hawaii's commentary click here. More Special Funds?! By Tom Yamachika, President After going through the hundreds of bills introduced in the 2020 Legislature, a few themes appear to be emerging. One of them is that there are a plethora of requests for “special funds.” Special funds are pots of money that exist for a specific purpose, and largely bypass the legislative appropriation process. The existence of hundreds of these special funds has often confounded those who seek answers to simple questions like “How much money does the State have?” This year, for example, bills have been introduced to establish:
Our Legislature is supposed to be the steward of all state moneys, but special funds make it very easy to lose track of where the money is and how it is being spent. Departments are supposed to tell the Legislature if they have special funds and how much is in them, but they don’t always. Recently, in Report No. 20-01, the State Auditor took DBEDT to task for failing to report $6.5 million in non-general fund moneys. DBEDT’s response? Just that they’ll “take corrective action.” Not even a “Whoops! We screwed up and promise to do better next time!” This followed closely on the heels of Report No. 19-16, where the Auditor found that $1.04 million in non-general fund moneys administered by the Attorney General wasn’t reported. That department responded that they “shall establish procedures to assure required reports are issued.” Is it any wonder that it’s getting harder and harder to follow the money and rein in government spending? Another tactic that appears to be gaining traction among special fund supporters is “scope creep.” It involves expanding the scope of what the special fund moneys may be spent on. If special fund moneys can be spent on more and more things, then there tends to be more spending, and then the funds need to be fed more and more to stay afloat. Then who is going to do the feeding? Probably we, the taxpayers. The moral of the story is that special funds are often used to obfuscate and confuse, to put a smokescreen between those who spend the money and those who are charged with making sure the money is well spent. Let’s do all of ourselves a favor and get rid of the special funds we don’t really need, and make sure that the operations of the ones we do need are transparent and accountable. |
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