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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Feb. 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: SB1348 — RELATING TO GENERAL EXCISE TAX EXEMPTIONS
Comments Only
Dear Chair and Committee Members:
The Grassroot Institute of Hawaii would like to offer comments on SB1348, which would exempt from the general excise tax feminine hygiene and incontinence products, over-the-counter medications and groceries eligible under the federal Supplemental Nutrition Assistance Program.
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 feminine hygiene and incontinence products, over-the-counter medications and SNAP-eligible groceries would go a long way toward making Hawaii more affordable for struggling 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 estimates that Georgia’s sales tax exemption for groceries has created more than 5,000 jobs and an additional $807 million in economic output.[3]
The measure also avoids the concern that tourists might be the primary beneficiaries from changes to the GET. By narrowing the exemption to SNAP-eligible food, the bill retains the excise tax on restaurants and thus covers a significant amount of visitor food spending.
The exemption for feminine hygiene and incontinence products would help ensure that Hawaii residents would not be forced to choose between maintaining their own dignity and other basic necessities.
Regarding over-the-counter medications, a GET exemption 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 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 and feminine hygiene and incontinence products might save, but the total economic impact of this bill would be large, generating relief for consumers across the board.
I would be remiss if I did not 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.
We applaud the committee for hearing such a timely and important bill. For many residents, these exemptions would prove helpful by lowering Hawaii’s cost of living.
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.
