Tax hike proposal mulled by county officials

HILO — A measure currently being considered by Hawaii County officials would add another half-percent to the general excise tax charged on goods and services.

The added tax must be used for transportation projects, under the authority the state Legislature and Gov. David Ige gave the counties last year. The money can be spent on operating or capital expenses for public roadways or highways, public buses, trains, ferries, pedestrian paths or sidewalks, bicycle paths and compliance with the Americans with Disabilities Act, under the terms of the state law.

Had the county had the additional tax last September, the latest data available, it would have brought in about $1.7 million more that month, based on calculations using the $14.6 million collected for September and reported by the state Department of Taxation.

The County Council must hold a public hearing before passing the tax surcharge and must have a bill passed and signed by the mayor before July 1, or the ability to enact the tax expires. If passed, it wouldn’t go into effect until January 2018.

Hilo Councilman Dennis “Fresh” Onishi, who is sponsoring the as-yet unnumbered bill, said the county should keep its options open by passing the bill.

“I want to do it so that it gives the next administration the opportunity to keep it or repeal it,” Onishi said Wednesday. “If this council doesn’t pass it this year, the administration coming forward won’t have that option.”

Mayor Billy Kenoi’s administration is reviewing the measure now, Onishi said. He said he’s scheduled meetings over the next two days with Kenoi, the county Finance Department and the Department of Public Works, seeking input on the bill.

Kenoi couldn’t be reached for comment Wednesday, but he had seemed favorable about the measure last year when Ige signed it. At the time, he said he wouldn’t ask the County Council for the tax hike, but he was ready to discuss it.

“It’s an important tool, it’s an additional tool to pay for important infrastructure,” Kenoi said at the time. “It’s something we’ll take a look at. It’s not something we’re asking the council to do at this time.”

Deputy Finance Director Lisa Miura said late Wednesday that Finance Director Deanna Sako had just sent comments about the bill to Onishi. Miura said she didn’t know the details, and Onishi said he hadn’t reviewed them yet for comment by press time Wednesday.

Unlike a sales tax, the GET is applied against all steps of a manufacturing process, leading to costs passed on to consumers beyond the 4.16 percent at the register. About one-third of it is paid by visitors.

The bill was widely supported by trade unions and government officials, while business groups such as the Chamber of Commerce of Hawaii and the Hawaii Association of Realtors opposed it.

Businesses contacted Wednesday were mixed in their reaction to the possibility of an additional tax.

“We are monitoring the issue and it is premature to comment,” said Wendy Gutshall, a spokeswoman for Safeway grocery stores on the island.

State Sen. Russell Ruderman, a Puna Democrat who voted for the measure last year, is also owner of Island Naturals, a natural-food grocery chain with stores in Hilo, Puna and Kailua-Kona.

Ruderman said he doesn’t think the increase in the GET would be reflected in increased prices at his stores, but the additional one-half cent tax would be added at the register, if it becomes law.

“I don’t think any retailer would not add that to the tax rate,” he said.

As with most special taxes, it’s important that the additional money be used to enhance the services it’s earmarked for, rather than replace money already budgeted for those services, Ruderman added.

“I’m supportive of it,” Ruderman said, “but I have concerns that it could go all wrong.”

The states’ four mayors had asked the state to allow the one-half cent to make up for cutbacks in the counties’ share of the transient accommodations tax, paid by guests at hotels and part-time renters.