STAND. COM. REP. NO.1187

Honolulu, Hawaii

, 2003

RE: H.B. No. 1554

H.D. 1

S.D. 1

 

 

Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committees on Transportation, Military Affairs, and Government Operations and Tourism, to which was referred H.B. No. 1554, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO COUNTY TAXES,"

beg leave to report as follows:

The purpose of this measure as received by your Committees was to repeal the limitations on the county general excise and use tax (GETU) surcharge, to authorize the City and County of Honolulu to establish a GETU surcharge in an unspecified percentage, and to alter the distribution of transient accommodations tax (TAT) revenues if the City and County of Honolulu established a GETU surcharge.

Your Committees received testimony in support of this measure from the Honolulu City Council Chair, the Honolulu Department of Budget and Fiscal Services, the Kauai County Council Vice Chair, the Maui County Mayor, the Maui County Budget Director, the Chair and Finance Committee Chair of the Hawaii County Council, and the Hawaii County Finance Director.

Testimony in opposition to this measure was submitted by the Chamber of Commerce of Hawaii, the Honolulu City Council member from District IV, and the Hawaii Association of Realtors.

The Department of Taxation, the Hawaii Tourism Authority, and the Tax Foundation of Hawaii submitted comments.

Your Committees find that the City and County of Honolulu, like all jurisdictions in the State, is struggling to find the revenue resources necessary to maintain basic health and safety services, as well as preserving and enhancing the quality of life for our residents.

Currently, the counties are dependent on receiving state funds, as the counties' only consistent independent source of revenue is the real property tax. Your Committees find that the real property tax, while a solid source of revenue, unduly burdens real property owners. Your Committees believe that in addition to the real property tax, it would be more equitable to authorize a county-level tax that applies more broadly. Therefore, your Committees support the general intent of this measure.

Your Committees amended this measure to replace the GETU surcharge with provisions to authorize the City and County of Honolulu to assess and collect a retail sales tax of up to one per cent on the amount of tangible personal property sold in the county.

As provided for in the original measure, if the City and County of Honolulu assesses a retail sales tax, the City and County will forfeit its portion of the TAT revenue, which will be redistributed so that the other counties and the tourism special fund receive a higher percentage of the TAT. Your Committees believe that your Committee on Ways and Means and the Legislature should carefully review the distribution of TAT revenues in light of anticipated budgetary shortfalls.

As amended by your Committees, this measure requires that the state Department of Taxation (DoTAX) assess and collect the retail sales tax revenue from retail sellers on behalf of the City and County of Honolulu. DoTAX may retain five per cent of the amount collected as reimbursement for the costs of assessment and collection.

As affirmed by the records of votes of the members of your Committees on Transportation, Military Affairs, and Government Operations and Tourism that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 1554, H.D. 1, as amended herein, and recommend that it pass Second Reading in the form attached hereto as H.B. No. 1554, H.D. 1, S.D. 1, and be referred to the Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committees on Transportation, Military Affairs, and Government Operations and Tourism,

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DONNA MERCADO KIM, Chair

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CAL KAWAMOTO, Chair