Honolulu, Hawaii
                                                     , 1999

                                   RE:  S.B. No. 17
                                        S.D. 2

Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii


     Your Committee on Ways and Means, to which was referred S.B.
No. 17, S.D. 1, entitled: 


begs leave to report as follows:

     The purpose of this measure is to reimburse the counties for
amounts of general excise tax passed on to them by businesses.

     Testimony in support of this measure was received from the
City Council of the City and County of Honolulu, Department of
Budget of the City and County of Honolulu, Mayor of the County of
Maui, Hawaii Hotel Association, Maui Hotel Association, and a
member of Maui County Council.  Comments were received from the
Tax Foundation of Hawaii.  Testimony opposed to this measure was
received from the Department of Taxation.
     Your Committee finds that all the counties in Hawaii are
facing budget deficits this coming fiscal year and next.  As a
result, the counties are embarking on a thorough examination of
their operations in an effort to decrease spending, while
maintaining essential services.  Concurrently, the counties are
seeking ways to increase their revenues.

     Your Committee finds that the general excise tax raises the
cost of operating the county governments.  Moneys paid for the
tax could otherwise be used to balance the counties' budget and
to provide for additional services, programs, and benefits to the

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                                   STAND. COM. REP. NO. 743
                                   Page 2

     Your Committee finds that the general excise tax is imposed
on businesses selling to the counties, however, the tax, in
reality, is passed on to the counties on their purchases of goods
and services.  The end result is that the State is deriving tax
revenues from the counties.

     Your Committee finds that this measure will allow the money
saved by the counties to be expended for public programs and
projects and will reduce the counties reliance on the real
property tax at a time when this revenue source is declining.

      Your Committee has amended this measure by providing that
the first two years of reimbursement shall equal fifty per cent
of the general excise tax paid, and from fiscal 2001-2002 to
2004-2005 shall equal one hundred per cent.  Reimbursements will
continue through fiscal year 2004-2005, at which time the
Legislature can review the results of this measure.
     As affirmed by the record of votes of the members of your
Committee on Ways and Means that is attached to this report, your
Committee is in accord with the intent and purpose of S.B.
No. 17, S.D. 1, as amended herein, and recommends that it pass
Third Reading in the form attached hereto as S.B. No. 17, S.D. 2.

                                 Respectfully submitted on behalf
                                 of the members of the Committee
                                 on Ways and Means,

                                 CAROL FUKUNAGA, Co-Chair

                                 ANDREW LEVIN, Co-Chair

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