Bill Text: HI SCR138 | 2016 | Regular Session | Amended

---

Bill Title: Tax Review Commission; General Excise and Use Tax Increase Evaluation

Spectrum: Partisan Bill (Democrat 12-0)

Status: (Passed) 2016-06-02 - Certified copies of resolutions sent, 06-02-16. [SCR138 Detail]

Download: Hawaii-2016-SCR138-Amended.html

---

THE SENATE	S.C.R. NO.	138
TWENTY-EIGHTH LEGISLATURE, 2016		H.D. 1
STATE OF HAWAII

SENATE CONCURRENT

RESOLUTION

 

 

REQUESTING THE TAX REVIEW COMMISSION TO EVALUATE THE IMPACTS OF GENERAL EXCISE AND USE TAX INCREASES PROPOSED DURING THE REGULAR SESSION OF 2016 AND general excise tax pyramiding as applied to transient ACCOMMODATIONS.

 

 

     WHEREAS, it is anticipated that a Tax Review Commission will be convened, pursuant to article VII, section 3, of the state constitution; and

 

     WHEREAS, the basic duties of the Tax Review Commission are to evaluate the State's tax structure and recommend revenue and tax policy; and

 

     WHEREAS, during the Regular Session of 2016, the Legislature considered two proposals to increase the general excise tax and use tax, one to finance long-term care benefits and the other to fund education programs; and

 

     WHEREAS, reliable estimates of the general fund revenue impacts of the proposed general excise and use tax increases were relatively easy to obtain from the Department of Taxation; and

 

     WHEREAS, other impacts, however, were not understood or fully discussed because of the lack of sufficient objective information; and

 

     WHEREAS, the impacts that should be better understood include the following:

 

     (1)  The persons or businesses that will actually bear the cost of the tax increases;

 

     (2)  The extent of any regressivity that is likely to be caused by the tax increases;

 

     (3)  The compatibility of the tax increases with the public's general preference for a progressive tax structure;

 

     (4)  The necessity for income tax credits to relieve the burden on low-income residents;

 

     (5)  The proportion of the tax increases that will be exported;

 

     (6)  The assurance that revenues from the tax increases would be dedicated to and expended exclusively for their intended purpose;

 

     (7)  The fairness of imposing such a broad and substantial tax increase on all taxpayers, including many who would not benefit from the programs that the tax increases are intended to fund; and

 

     (8)  The capability of the Department of Taxation to implement the tax increases; and

 

     WHEREAS, the Tax Review Commissions of 1989 and 1995, after extensively studying the Hawaii general excise tax, both recommended structural changes to the general excise tax because of excessive pyramiding, which occurs when the tax is applied multiple times to the same product, service, or other economic activity before it reaches the ultimate consumer; and

 

     WHEREAS, the sublease deduction enacted by Act 353, Session Laws of Hawaii 1997, and codified in section 237-16.5, Hawaii Revised Statutes, represented the first steps in mitigating the impacts of pyramiding, and was followed by Act 70, Session Laws of Hawaii 1999, Act 71, Session Laws of Hawaii 1999, and Act 198, Session Laws of Hawaii 2000, which fundamentally changed the general excise tax by eliminating much of the pyramiding related to the furnishing of services; and

 

     WHEREAS, as a result of the current sublease deduction, when both a sublessor and a sublessee pay rent on the same leased property, the sublessor may be allowed a tax deduction from the gross proceeds or gross income that the sublessor receives from the sublease, so that both parties are not required to pay the full general excise tax on the gross proceeds or gross income; and

 

     WHEREAS, the Department of Taxation has taken the position that the sublease deduction cannot be applied to mitigate the impact of pyramiding when an operator of transient accommodations, such as a hotel, pays rent to a landlord and the guest pays room charges to the operator, even though the room charge paid to the operator represents, at least in substantial part, a charge for occupancy of real property, and the rent the operator pays to the landlord is a charge for occupancy of the same real property; now, therefore,

 

     BE IT RESOLVED by the Senate of the Twenty-eighth Legislature of the State of Hawaii, Regular Session of 2016, the House of Representatives concurring, that the Tax Review Commission is requested to conduct or commission a study to:

 

     (1)  Evaluate the impacts of a general excise and use tax increase, as proposed under Senate Bill No. 2599 for public education and Senate Bill No. 2478 for long-term care financing; and

 

     (2)  Analyze whether the sublease deduction can and should be applied to hotels in a manner similar to other subleased real property; and

 

     BE IT FURTHER RESOLVED that the Tax Review Commission is requested to submit the study to the Legislature and Governor with the Commission's final report under article VII, section 3, of the state constitution; and

 

     BE IT FURTHER RESOLVED that a certified copy of this Concurrent Resolution be transmitted to the Chairperson of the Tax Review Commission.

 

 

 

Report Title: 

Tax Review Commission; General Excise and Use Tax Increase Evaluation