Fall 1998 Home   Newsletters

Winter 1998

Spring 1999

President's Message (Jean Aoki)
Changes to the State Excise Tax? (Astrid Monson)
Member Survey
Coordinated Community Response System to Domestic Violence (Val Kanuha)
Fairest Among Thousands (Betty Smith)
Making Democracy Work: Campaign Finance Reform (Toni Worst)
Wetlands & Agriculture: Public Interest and Public Benefits
League Local News - Hawaii County
League Local News - Kauai County
League Local News - Honolulu League
Education Committee (Mary Anne Raywid)
General Election Statistics for 1996 & 1998
Population Explosion: 6 Billion People in 1999
Scorecard on Gambling Positions
Model UN Project (Helene Hale)
State Board Actions
Web Page

Changes to the State Excise Tax?

For the third time in less than three years, calls are being heard to reduce the State Excise Tax from its present 4% to something around 3%, as well as to cut down the amount of pyramiding (charging a tax on a transaction which already includes a tax previously levied).

Tax Review Commission Proposals

The 1997 Tax Review Commission proposed that the revenue loss this could create be made up for by ending the exemptions from excise taxes given to some non-profit establishments such as health, education and welfare agencies, for example, as well as to their profit-making activities.

The Commission also suggested ending the tax-exempt status of many entirely commercial, industrial or other profit-making activities which had managed to get tax exemptions in the past for reasons the legislature thought valid at that time – new establishments just getting started, Hawaii businesses having trouble competing with mainland establishments, etc. The Commission recommended that the legislature systematically and periodically review these exemptions and repeal those that have no compelling economic or other justification.

Among existing specific exemptions of this kind the Commission listed: petroleum refineries; loading, transporting and unloading of agricultural products; sale of sugarcane products; real property rental income of labor organizations; and solid waste processors.

In the 1998 Legislature

In the 1998 Legislature, several bills were considered dealing with these and similar recommendations. However, emphasis was on elimination of the exemptions for genuinely public-serving, non-profit agencies like hospitals, and of course there was a storm of protests against this.

League testified several times on what we thought should be done. For example, in our testimony before the House Finance Committee we said:

"The bill now before you is along the lines the Tax Review Commission recommended, but we believe it goes too far in removing the exemptions for nonprofits, non-profit medical facilities, the disabled, etc. We feel that assistance to bona-fide nonprofit social agencies and handicapped people is justified, and we, therefore, oppose those provisions of the bill which remove the existing exemptions they enjoy. We support the provision, however, that exemptions do not apply to receipts derived from activities for which the primary purpose is to provide income. This is the case even though such income is to be used for or in the furtherance of the exempt purpose of the organization."

Neither the legislature nor the press picked up on our suggestions and most of these died on the vine.

Looking Ahead to 1999

Recently, Calvin Say, 1998 Finance Committee chair and now Speaker of the State House of Representatives, has revived several of these ideas – especially decreasing the Excise Tax and requiring non-profit agencies to pay it. We have not seen in the press any reference to agencies to pay it. We have not seen in the press any reference to limiting the tax on non-profit agencies to their profit-making activities – the Bishop Estate comes to mind – nor to ending the exemptions for the many profit-making industries now enjoying them.

League will continue to oppose putting a tax burden on health, welfare and other establishments serving the poor, the sick, the aged, and underprivileged children, etc. while permitting profit-making activities to continue to operate tax-free.

Astrid Monson
Tax Study Committee

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