The case for exempting medical services from Hawaii's general excise tax

Hawaii policymakers seeking to solve the state’s acute physician shortage must address the financial barriers that make it more difficult for private medical practitioners to thrive in Hawaii.

In particular, they should lighten the tax burden on Hawaii doctors, especially regarding the state general excise tax.

A medical services exemption from the state GET would cost the state an estimated $222 million in lost tax revenues annually. However, since the state has a $2.6 billion surplus for fiscal year 2023 and is expecting a surplus of about $10 billion over the next four years, it is in an excellent position to afford such a tax exemption.

In addition, to the extent that the exemption would help resolve Hawaii’s doctor shortage, the $222 million could be considered money well spent.

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