The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the Senate Committee on Energy and Intergovernmental Affairs on Feb. 12, 2025.
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Feb. 12, 2025, 3:20 p.m.
Hawaii State Capitol
Conference Room 016 and Videoconference
To: Senate Committee on Energy and Intergovernmental Affairs
Sen. Glenn Wakai, Chair
Sen. Stanley Chang, Vice Chair
From: Grassroot Institute of Hawaii
Ted Kefalas, Director of Strategic Campaigns
RE: SB492 — RELATING TO THE GENERAL EXCISE TAX
Aloha Chair Wakai, Vice-Chair Chang and members of the Committee,
The Grassroot Institute of Hawaii opposes SB492, which would allow Hawai‘i, Maui and Kaua‘i counties to use their excise tax surcharges for housing infrastructure.
It would also extend the expiration date of Honolulu’s GET surcharge from Dec. 31, 2030 to Dec. 31, 2045 — stoking the well-known cynical view that there is no such thing as a temporary tax.
The context here is that the state allowed Honolulu to levy a 0.5% surcharge on the state’s GET in 2005,[1] and it was supposed to sunset Dec. 31, 2022. But the 2017 Legislature extended that expiration date to Dec. 31, 2030.[2]
Now, SB1333 proposes to delay the sunset of that sunset to 2045 — 23 years after it was first set to expire.
A far better choice than what is being proposed in this bill would be to simply allow the county GET surcharges to lapse. Otherwise, what we would be doing is permanently increasing Hawaii’s combined GET rate to 4.5%, despite the statements originally that it would fall back to 4% in 2031.
In addition, the GET is widely recognized as being a regressive tax, which makes the idea of a permanent increase even more objectionable. Rhetoric notwithstanding, a “surcharge” is a tax hike, and a permanent increase in the GET would disproportionately affect Hawaii’s most economically disadvantaged residents.
According to the Institute on Taxation and Economic Policy, Hawaii’s GET falls most heavily on those least able to afford it and takes up an average of 11% of family income for the poorest 20% of earners.[3]
Please reject this “forever temporary tax” and defer SB492.
Thank you for the opportunity to testify.
Ted Kefalas
Director of strategic campaigns
Grassroot Institute of Hawaii
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[1] James Mak, “The Exorbitant Cost of Collecting Honolulu’s Rail Surcharge Tax,” The Economic Research Organization at the University of Hawai‘i, Feb. 2, 2017.
[2] “Hawaii Gov. Ige signs bill to fund Honolulu’s transit-rail project,” Progressive Railroading, Sept. 7, 2017.
[3] Meg Wiehe, et al., “Who Pays? A Distributional Analysis of the Tax Systems in All 50 States,” Sixth Edition. Institute on Taxation and Economic Policy, October 2018, p.54.
