A few weeks ago, I wrote of an effort by the state's mayors to acquire the authority to slap a surcharge onto the general excise tax and use the tax just as it is in Honolulu, where there is a 0.5 percent surcharge to pay for rail. This bill is still alive and it represents probably the largest tax increase still moving.
The bill, as it now exists, attempts to address a thorny problem called roads in limbo. There are roads on all islands whose ownership between the state and the county is uncertain. These roads have fallen into disrepair. The counties are concerned that if they repair the roads, they will be considered to own them, meaning that the counties will be saddled with the burden of maintaining the roads forever and will also own any liability issues concerning those roads from the past, present or future. So, naturally, the counties don't repair the roads. The state, of course, has a similar concern so it doesn't repair the roads either.
This bill, therefore, represents one solution, if you can call it that, as it relates to all counties other than Honolulu. It goes like this: If Kauai, Maui and Hawaii counties each adopt ordinances authorizing a 0.5 percent surcharge, the state will attach that surcharge to the general excise tax through 2022. There will then be one 4.5 percent rate across the board. That extra money will go to the counties, and they can use it to repair the roads while their ownership is being sorted out. If there is money left over, which apparently the counties are anticipating, they can use the money for Americans with Disabilities Act compliance as it relates to roads.
This is all very nice, perhaps, for three of the counties. But then what happens to Honolulu? Honolulu is using its 0.5 percent surcharge for rail, but there are roads in limbo in Honolulu as well.
Back to the main story. This bill proposes a tax increase. Once we go down this path, even though we say the tax is going to be temporary, it's going to be tough to give it up. Do you remember that in 1986 lawmakers told us that they were going to enact a 5 percent transient accommodations tax and it was going to be temporary, just to pay for the convention center? It is now 28 years later, the convention center has been built and the tax still hasn't been allowed to sunset - far from it. Just last year the state enacted Act 161, SLH 2013, making the temporarily enhanced 9.25 percent TAT permanent because there was a need for that money. So pardon me if I am skeptical of temporary tax increases. (The counties, of course, are presently clamoring for some additional money from the TAT, too, but that's another story - and another set of bills.)
And then, if this measure is adopted, why stop at the counties? In past years, for example, the Department of Education pushed very hard for school districts with taxing power. If this precedent is enacted, it will be tougher to tell the DOE to take a hike. If more of these taxing jurisdictions are adopted, as is the case in many other states, our general excise tax will mushroom, both in rate and complexity.
The bottom line is the same across the board. Elected officials must be willing to tighten the counties' or the state's purse strings in bringing expenditures into line with resources and setting priorities responsibly for what resources are already available. Let's not go with the mindless choice to beat up on the taxpaying public yet again.
* Tom Yamachika is the interim president of the Tax Foundation of Hawaii.