The Tax Review Commission will take public comment on a consultant’s study that suggests a double-digit hike in the general excise tax to keep up with the pace of government spending. Many lawmakers and public advocates say they won’t take the advice.
The Tax Review Commission takes a look every 5 years at tax policy, and this round’s study by The PFM Group has concluded the state should “modify the tax structure in ways that will create sufficient revenue to match the expenditure needs." The centerpiece is a half-percentage point increase in the general excise tax, which equate to a 12.5 percent hike above the 4% statewide rate and 11.1 percent above the 4.5% Oahu rate.
"The consultant report assumes that the current level of services are going to continue,” said commission chairman Randy Iwase, “so we are not calling for any kind of cuts, and we can’t."
The study says by 2025 revenue will be behind costs by as much as $18 billion accruing for all the unfunded retirement liabilities
Many are taking issue with the study, saying the consultants should have been assigned to stick only to matters such as tax fairness and system efficiency.
"It seems that the commission has been hell bent on finding new sources of money," said Lowell Kalapa of the Tax Foundation of Hawaii. “I think this commission unlike all the others in the past has gone off on the deep end and not followed the constitution."
The commission says otherwise
"To go blindly into the night so to speak and make revenue projections and tax policy without any understanding of the impact of expenditure costs to the state, it would be malfeasance, it would be wrong,” Iwase said.
Lawmakers say while they’ll look at the tax credit and sunset matters in the report, they’re not in for an across-the-board hike.
"A half-percent GE tax increase will hurt businesses, hurt lower income, and possibly put a damper on our economy right now,” said Rep. Marcus Oshiro, House Finance chairman.
“Tax policies should try to incentivize more economic growth, and some of the proposals are primarily stymying growth as I see it,” said House Speaker Rep. Calvin Say.
The commission stands by the study doing its part on the revenue side, but warns expenses are an open-ended problem.
"You can sit around and anesthetize the public that everything is alright, go to sleep,” Iwase said, “but when you wake up, the world is going to be very different, it’s going to be more painful, so action has to be taken now."
The Tax Review Commission public comment session takes place Tuesday, Sept. 11, from 9 to 11 a.m. at the State Capitol, Room 309.
See the original article at: KHON2 Local News
