Council to mull GET surcharge: Additional half percent to pay for transportation projects

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The public will get its chance to weigh in on a taxing question next week, when the County Council Finance Committee considers a half-percent general excise tax surcharge for transportation projects.

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The public will get its chance to weigh in on a taxing question next week, when the County Council Finance Committee considers a half-percent general excise tax surcharge for transportation projects.

Bill 165 is scheduled to be taken up at 2 p.m. Tuesday at council chambers in Hilo. Testimony will also be taken by videoconference from the West Hawaii Civic Center, Waimea council office, Kamehameha park conference room in Kapaau, Naalehu state office building and Pahoa neighborhood facility.

If passed by the council and approved by the mayor, the tax hike, which will apply to all goods and services changing hands within the county, would not be implemented until Jan. 1, 2018.

“This gives that opportunity for the next administration and the next council the opportunity of either implementing it or they can repeal it,” bill sponsor Councilman Dennis “Fresh” Onishi of Hilo, who is term-limited, said Thursday. “But if we don’t pass it, then they won’t have that option.”

The added tax must be used for transportation projects, under the authority the state Legislature and Gov. David Ige gave the counties last year. The County Council must hold a public hearing before passing the tax surcharge and must have a bill passed and signed by the mayor before July 1, or the ability to enact the tax expires.

Finance Committee Chairwoman Karen Eoff hopes the public will speak on the issue.

“The positive side is that the tax would be a way to bring a significant amount of money into the county’s budget to help keep up with infrastructure needs, but the tax has also been criticized because it applies to the sale of basic necessities such as food and medical services — items that are exempt from sales tax in most states,” Eoff said. “I hope to hear from our constituents during the Finance Committee meeting or via email or other forms of testimony on how they feel this would impact them.”

The money can be spent on operating or capital expenses for public roadways or highways, public buses, trains, ferries, pedestrian paths or sidewalks, bicycle paths and compliance with the Americans with Disabilities Act, under the terms of the state law. It can also be used to pay off bond debt for those projects.

Unlike a sales tax, the GET is applied against all steps of a manufacturing process, leading to costs passed on to consumers beyond the 4.16 percent at the register. About one-third of it is paid by visitors.

Hamakua Councilwoman Valerie Poindexter likes the fact that tourists shoulder some of the tax burden. They use the roads as well, she noted, adding that the GET surcharge seems more fair than increasing property taxes or gas taxes.

Poindexter said having the ability to add a surcharge to the GET is a home-rule issue, as it’s up to the county, unlike rules coming down from Honolulu. She’s not sure she’d want to use it, but she’d like to retain the option, she said.

“It would be like an emergency trump card for me,” Poindexter said.

Increasing the general excise tax has long been a concern for the nonprofit Tax Foundation of Hawaii, a 60-year-old educational organization that encourages efficiency and economy in government and promotes an equitable tax system.

The GET is a regressive tax — hitting lower-income people harder because it is applied uniformly, thus taking a larger percentage from low-income people than high-income individuals. It’s also broad-based, applied to goods, services, rents, royalties and interest.

“It’s the broadest tax in the country,” said Tax Foundation President Tom Yamachika.

Had the county had the additional tax last November, the latest data available, it would have brought in about $2.3 million more that month, based on calculations using the $458.5 million collected for November and reported by the state Department of Taxation.

Yamachika recommends that governments make sure they are operating as efficiently as possible before raising taxes.

“It’s a good idea to look internally before going to the taxpayers and saying, ‘Give us more and more and more,’” Yamachika said.

Mayor Billy Kenoi couldn’t be reached for comment Thursday, but he had seemed favorable about the measure last year when Ige signed it. At the time, he said he wouldn’t ask the County Council for the tax hike, but he was ready to discuss it.

“It’s an important tool, it’s an additional tool to pay for important infrastructure,” Kenoi said at the time. “It’s something we’ll take a look at. It’s not something we’re asking the council to do at this time.”

The bill was widely supported by trade unions and government officials, while business groups such as the Chamber of Commerce of Hawaii and the Hawaii Association of Realtors opposed it. Local chambers of commerce did not respond to inquiries by press time Thursday.

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The state’s four mayors had asked the state to allow the one-half cent to make up for cutbacks in the counties’ share of the transient accommodations tax, which is paid by guests at hotels and part-time renters.

Email Nancy Cook Lauer at ncook-lauer@westhawaiitoday.com.

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