The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the House Committee on Economic Development and Technology on Feb. 5, 2025.
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Feb. 5, 2025, 10 a.m.
Hawaii State Capitol
Conference Room 423 and Videoconference
To: House Committee on Economic Development and Technology
Rep. Greggor Ilagan, Chair
Rep. Ikaika Hussey, Vice Chair
From: Grassroot Institute of Hawaii
Ted Kefalas, Director of Strategic Campaigns
RE: HB572 — RELATING TO GENERAL EXCISE TAX
Aloha Chair Ilagan, Vice-Chair Hussey and other members of the Committee,
The Grassroot Institute of Hawaii supports HB572, which would exempt from the general excise tax all medical services offered by medical or dental providers, groceries and certain prepared meals.
This is a good bill, one that would make an immediate difference when it comes to addressing Hawaii’s high cost of living. Research shows that taxes on groceries contribute to less spending on meals at home[1] and higher food insecurity,[2] so exempting groceries would go a long way toward making Hawaii more affordable for these struggling Hawaii residents.
In addition, the state’s 4% general excise tax is regressive, hitting low and middle-income individuals and families the hardest, so again, an exemption affecting many of these families would help them keep food on their tables.
This bill would also have broader 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]
For anyone concerned that tourists might be the primary beneficiaries of changes to the GET, HB933 limits the proposed exemption to only groceries and prepared meals served at senior citizens’ centers and certain charities. The bill would retain the excise tax on restaurants, and thus a significant amount of visitor food spending.
In 2022, the Hawaii Department of Taxation director estimated that exempting groceries from the general excise tax could save taxpayers $268 million,[4] giving everyone relief from Hawaii’s cost of living.
Regarding medical care, expanding the current excise tax exemption for medical services provided under Medicare, Medicaid and TRICARE would go a long way toward making healthcare more accessible and helping Hawaii recruit and retain physicians.
Hawaii’s physician shortage stands at 768, up from 757 in 2023. Hawaii Island and Maui have the highest shortages as a percent of the workforce, at 40% and 41% respectively.[5]
Last year’s Act 47 — which created a limited GET exemption for medical services payments provided under Medicare, Medicaid and TRICARE — will no doubt help Hawaii’s doctors when it comes into force in 2026, but this bill would provide immediate relief from the excise tax, ending Hawaii’s status as the only state to tax medical care.[6]
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] Isaac Choy, “Column: GET not as regressive as some believe,” Honolulu Star-Advertiser, July 24, 2022.
[5] “Annual Report on Findings from the Hawai‘i Physician Workforce Assessment Project,” University of Hawai‘i, December 2024, p. 6.
[6] Keli’i Akina, “Let’s end embarrassing tax on medical services,” Grassroot Institute of Hawaii, April 20, 2024.
