The following testimony was presented Feb. 3, 2023, by the Grassroot Institute of Hawaii to the Senate Committee on Health and Human Services.
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February 3, 2022
1 p.m.
VIA VIDEOCONFERENCE
Conference Room 225
To: Senate Committee on Health and Human Services
Sen. Joy San Buenaventura, Chair
Sen. Henry Aquino, Vice Chair
From: Grassroot Institute of Hawaii
Ted Kefalas, Director of Strategic Campaigns
RE: SB1118 — RELATING TO GENERAL EXCISE TAX
Comments Only
Dear Chair and Committee Members:
The Grassroot Institute of Hawaii would like to offer comments on SB1118, which would exempt from the state general excise tax groceries eligible under the federal Supplemental Nutrition Assistance Program, nonprescription medications, medical equipment and medical supplies.
The exemption would be gradually phased in between 2024 and 2027, reducing the GET on these goods from the current 4% rate to 0%.
This is a good bill, one that would make an immediate difference when it comes to addressing Hawaii’s high cost of living, which has been a major reason for the state’s steady decline in population over the past six years.
As we all know, the general excise tax is regressive, hitting low and middle-income individuals and families the hardest. Exempting SNAP-eligible groceries, nonprescription medication and medical supplies would go a long way toward making Hawaii more affordable for these struggling Hawaii residents.
Exempting groceries from the GET would help families keep food on the table. Research shows that taxes on groceries contribute to less spending on meals at home[1] and higher food insecurity.[2]
Reducing the GET on food immediately, at the point of purchase, would ensure families keep more of their paychecks instead of waiting until tax season to receive a tax credit — the value of which inflation would have already diminished.
Exempting groceries from the excise tax would also have significant economic benefits. The Georgia state auditor recently estimated that Georgia’s sales tax exemption for groceries created more than 5,000 jobs and an additional $807 million in economic output.[3]
This measure also would avoid the concern that tourists might be the primary beneficiaries of changes to the GET. By narrowing the exemption to SNAP-eligible groceries, the bill would retain the excise tax on restaurants and thus a significant amount of visitor food spending.
Regarding nonprescription medications and medical equipment and supplies, a GET exemption for these products would simply be in keeping with the logic behind the existing exemption for prescription drugs and prosthetics.[4]
If this bill were enacted, nonprescription medicines such as Tylenol and Advil would suddenly cost less, making it easier for many individuals suffering from everyday health conditions to find relief and save money.
This past summer, the director of the Hawaii Department of Taxation estimated that exempting groceries from the general excise tax could give taxpayers $268 million.[5] It is unclear how much an exemption for nonprescription medication, medical supplies and medical equipment might save, but the total economic impact of this bill would be quite large, generating relief for consumers across the board.
I would be remiss if I didn’t mention that medical services also should be exempted from the state GET. The Grassroot Institute’s new report “The case for exempting medical services from Hawaii’s general excise tax,” explains the benefits of that proposal in greater detail, and I encourage you to support that idea as well.
In any case, we applaud the committee for considering SB1118, a timely and important bill that would help lower Hawaii’s cost of living and possibly help stop the exodus of our families, friends and neighbors to the mainland.
Thank you for the opportunity to testify.
Ted Kefalas
Director of Strategic Campaigns
Grassroot Institute of Hawaii
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[1] Diansheng Dong and Hayden Stewart, “Food Taxes and Their Impacts on Food Spending,” U.S. Department of Agriculture, Economic Research Service, Sept. 2021, p. 7.
[2] Jianqiang Zhao, “Putting Grocery Food Taxes on the Table: Evidence for Food Security Policy-Makers,” Master’s Thesis, Cornell University, Aug. 2020, p. iii.
[3] “Tax Incentive Evaluation: Grocery Sales Tax Exemption,” Georgia Department of Audits and Accounts, Dec. 13, 2022.
[4] “Hawaii General Excise & Use Tax Exemptions: Tax Year 2021,” Hawaii Department of Taxation, Nov. 2022, p. 6.
[5] Isaac Choy, “Column: GET not as regressive as some believe,” Honolulu Star-Advertiser, July 24, 2022.
