STAND. COM. REP. NO. 288

 

Honolulu, Hawaii

                  

 

RE:    S.B. No. 749

 

 

 

Honorable Colleen Hanabusa

President of the Senate

Twenty-Fifth State Legislature

Regular Session of 2009

State of Hawaii

 

Madam:

 

     Your Committee on Economic Development and Technology, to which was referred S.B. No. 749 entitled:

 

"A BILL FOR AN ACT RELATING TO GENERAL EXCISE TAX,"

 

begs leave to report as follows:

 

     The purpose of this measure is to establish a general excise tax exemption for all of the gross proceeds or income arising from providing flight instruction.

 

     Testimony in opposition of this measure was submitted by the Department of Taxation.  Written testimony presented to your Committee is available for review on the Legislature's website.

 

     Your Committee finds that providing a general excise tax exemption for the services offered by flight training schools will provide a tax incentive that would increase the likelihood that flight training schools will be developed and located in Hawaii.  Your Committee also finds that the Department of Taxation's projected annual loss in general excise tax revenues does not take into consideration the fact that no general excise tax revenues are presently being recouped by the State for services offered by flight training schools and that the Department's estimated revenue loss fails to consider increases in other tax revenues that will be received by the State from the flight training schools, such as income, withholding, and employment taxes.  Those additional tax revenues would more than likely offset any losses of the State from general excise tax revenues.

 

     Your Committee received a fiscal impact statement from the Department of Taxation that this measure, as introduced, would result in an annual revenue loss to the State of $210,000.  Their methodology is as follows:

 

     The Department of Taxation estimates that there would be seven flight training schools located in Hawaii and that each training school would average an annual general excise tax liability of $30,000, thus a total general excise tax loss to the State of $210,000 each year.

 

     Your Committee believes that the impact of this measure must be measured in conjunction with the benefits attributable to increased economic activity from the combination of this measure and S.B. No. 1299, which includes businesses engaged in flight simulator training as a qualified business for purposes of the enterprise zone laws.

 

     As affirmed by the record of votes of the members of your Committee on Economic Development and Technology that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 749 and recommends that it pass Second Reading and be referred to the Committee on Ways and Means.

 

Respectfully submitted on behalf of the members of the Committee on Economic Development and Technology,

 

 

 

____________________________

CAROL FUKUNAGA, Chair