Bill would tax those
previously exemptedCargo, health and other services might pay a
By Mike Yuen
1.5 percent excise tax under a House proposal
Star-BulletinGov. Ben Cayetano's administration is conditionally endorsing a House bill that would repeal the general excise tax exemption for many activities and nonprofit organizations and impose a lower, as-yet unspecified "preferential" excise tax. The measure is laudable for attempting to broaden the state's tax base and impose "a level playing field" for nonprofits competing with for-profit counterparts, said Tax Director Ray Kamikawa.
Seiji Naya, director of the Department of Business, Economic Development and Tourism, added that the proposal is sensible.
But, Naya told the Senate Ways and Means Committee yesterday, "While eliminating exemptions is desirable in general, this is often difficult to accomplish in practice."
Kamikawa provided an example: "What is to distinguish the income from services provided by nonprofit hospitals and that of for-profit hospitals?"
His general rule -- "if it runs like a business, tax it like a business."
Kamikawa also wondered why the Bishop Estate and other organizations with charitable, religious, scientific or educational purposes should continue to be exempt from the excise tax.
They still place demands on government services such as roads and public safety, Kamikawa said.
Kamikawa added he doesn't favor having the proposed preferential tax imposed on property acquired by gift or inheritance.
"The state already piggybacks onto the federal estate and gift tax provisions," Kamikawa testified. "If this (proposed) provision is also meant to tax contributions to charities and other donees, this may go too far in base-broadening."
"It's not an easy issue," Kamikawa later said in an interview. "We should consider existing exemptions and question them in light of today's marketing and business world."
Kamikawa and Naya said the House proposal is in line with the recommendations of the Tax Review Commission, which suggested more than 20 excise tax exemptions be repealed.
Naya said it might be beneficial for all excise tax exemptions "to sunset," perhaps every five years so that they can be reviewed thoroughly before being allowed to continue.
Wayne Yamasaki, deputy executive director of the Hawaii Government Employees Association, which is fighting a Senate measure to impose unspecified salary cuts on all state workers, said the bill "puts forth some unpopular proposals" but "is fundamentally fair and appropriate in these tough times."
He added: "We believe that to be equitable to all parties affected, all existing general excise tax exemptions should be repealed and the new preferential tax rate applied likewise."
Lowell Kalapa, executive director of the Tax Foundation of Hawaii, said while many of the tax exemptions are questionable, the House proposal is not the answer.
Eliminating the exemption for stevedoring, for example, will only increase the cost of goods crossing the state's harbors and airports, he said.
If employee benefit plans lose the exemption, it would increase the cost of providing benefits to employees, Kalapa added.
Testifying against the House proposal were representatives of organizations that would lose the excise tax exemption, among them Hawaii Stevedores Inc., Hawaii Transportation Association, Queen's Health Systems, Hawaii Medical Service Association, Matson Navigation Co., American Lung Association of Hawaii, Hawaii Consortium for the Arts and Brigham Young University-Hawaii.
If a 1.5 percent preferential excise tax was imposed, it would cost the members of the Healthcare Association of Hawaii, which represents hospitals and nursing homes, at least $21 million annually, not including administrative costs, and "at least 1,081 full-time positions would be lost," said Joan White, association vice president.
Just Queen's Medical Center alone would see an additional operating cost of $4.5 million a year, said Pauline Osborne, chief financial officer for Queen's Health Systems.
If a 1.5 percent tax were to be imposed, it would generate roughly $200 million annually for the state, House Finance chairman Calvin Say (D, Palolo) has said.
$3.3 million in pageant funds
By Craig Gima
passes hurdle at state Senate
Star-BulletinDespite some objections, a bill to provide $3.3 million in state funds for the Miss Universe pageant is advancing in the Legislature. The Senate Economic Development Committee yesterday sent a House bill to appropriate the money to the Ways and Means Committee.
But Economic Development Co-Chairman Brian Taniguchi (D, Manoa) questioned why the Hawaii Visitors and Convention Bureau and the private sector are not putting up more money, which could reduce the state's share of the cost.
HVCB President Tony Vericella said the bureau hopes to get another $300,000 in in-kind donations from the private sector before the event, set for the week of May 11. He said the HVCB's money for this year has already been committed to other advertising efforts.
Vericella said earlier the money had to be appropriated by March 15. But after the hearing yesterday he said it would not need to be spent until April 21, when pageant officials begin arriving to prepare for the telecast.
Ways and Means Co-Chairwoman Rosalyn Baker (D, Lahaina) has not scheduled a hearing on the measure, but expected it would pass the full Legislature.
Seiji Naya, director of the Department of Business, Economic Development and Tourism, testified that the private sector is supporting the event.
He said the pageant will bring an anticipated 2,000 visitors to Hawaii and generate more than $9 million in economic benefits.
The state Commission on the Status of Women opposed the measure, calling it a "questionable approach to policy making."
Executive Director Ina Percival testified that millions of dollars already are appropriated to DBEDT and the visitors bureau while funding for critical services for women and children are being cut.
Sen. Sam Slom (R, Aina Haina) voted against the measure.
"I'm still not convinced the state should be involved," he said.
"The contract should not have been signed before we had a chance to review it."
LEGISLATURE UPDATE
A calendar of tomorrow's hearings -- to be held at the state Capitol, 415 S. Beretania St., unless noted. Hearings marked with asterisk will be aired live on Oceanic Channel 53 and TCI Cable 23:
HOUSE
Labor and Public Employment: Hearing on bills relating to workers' compensation claims arising from disciplinary actions for just cause, explosives, performance ratings of employees in the civil service and health benefits for part-time, temporary and seasonal or casual employees. Decision-making to follow unless chairman states otherwise, 8:30 a.m., Room 309.
income housing tax credit, public assistance and long-term care, 8:30 a.m., Room 329.
SENATE
