Bill fails to properly allocate new cigarette tax
Lingle has yet to sign a measure earmarking revenues for health and cancer programs
Because of errors made by state lawmakers, a bill hiking the state cigarette tax would divert the extra proceeds into the state treasury rather than the intended fund for cancer research and other related health services.
"Yes, there are technical flaws in the bill, (but) they're not fatal," said Sen. Rosalyn Baker, Senate Health Committee chairwoman and primary sponsor of the bill. "We can still collect the tax, which is the most important thing."
Senate Bill 2961, SD1, HD1, CD1, which increases the cigarette tax one penny per cigarette per year for the next six years, is now before Gov. Linda Lingle. The bill is estimated to raise $10 million a year for every 1-cent increase to fund cancer research, trauma care, emergency medical services and community health centers.
The current tax is 7 cents on a cigarette.
A new cancer research special fund is supposed to get the revenues from the first 1-cent increase. By year three it is supposed to get 2 cents of a 3-cent increase.
Cigarette tax revenue is supposed to start flowing into special funds for trauma care and emergency medical services in year two of the tax increase and for community health centers in year three.
"Not the way it's drafted," said Lowell Kalapa, executive director of the Tax Foundation of Hawaii.
As written, in year three of the increase, just 2 cents will be deposited into the Hawaii cancer research special fund.
That is to say, 2 cents total -- as opposed to the intended 2 cents per cigarette.
Similarly, half a cent is designated for the trauma system special fund, one-fourth of a cent for the new community health centers special fund and one-fourth of a cent for the emergency medical services special fund.
Plus, there is no statutory correlation between each yearly tax increase and each yearly allocation of the revenues. And the bill fails to earmark money in years four, five and six.
Senate Ways and Means Chairman Brian Taniguchi said Lingle could veto the bill for technical flaws.
"If she vetoes it for technical reasons, we gotta come back to fix it," he said.
But he is hoping for a favorable interpretation from the administration.
And Baker said the bill's intent is clear.
The deadline for Lingle to inform the Legislature which, if any, bills she intends to veto is June 26. State Tax Director Kurt Kawafuchi said his staff is still looking at the bill. The state Health Department also has yet to make a recommendation to the governor.
"We're still in discussion over the language in the bill as it was passed," said Janice Okubo, Health Department spokeswoman.
The tax increase is scheduled to begin Sept. 30.
Even if lawmakers are not able to correct the bill until next year, that should not jeopardize the Cancer Research Center of Hawaii's plans for its share of the tax revenue, said Carl-Wilhelm Vogel, the center's director.
"Even without the technical flaws, I don't think we would see any money until next year anyway," Vogel said.