LIHUE — The Kauai County Council has less than seven months to decide if it’s going to raise taxes on the island, a decision that will affect residents and visitors for the next 10 years. The tax in question is
LIHUE — The Kauai County Council has less than seven months to decide if it’s going to raise taxes on the island, a decision that will affect residents and visitors for the next 10 years.
The tax in question is the General Excise Tax, which currently is a 4 percent tax levied on all Hawaii businesses’ gross incomes. It’s usually seen as Hawaii’s sales tax because the majority of businesses pass the GET on to their customers.
The crux of that matter is whether to raise the GET one-half of a percent, with the money going toward transportation improvements.
Mayor Bernard Carvalho Jr.’s administration has put together a GET increase proposal. Staff members have been presenting the plan to entities around the island, like the Chamber of Commerce and the Kauai Visitors’ Bureau. A draft bill was submitted before the County Council in September, but it has not yet been placed on the agenda.
“Overall, I think that Kauai needs to look for creative solutions in order to make infrastructure investments that are going to be required over the next 10 years,” said Mark Perriello, president of the Kauai Chamber of Commerce. “The GET is a chance to do that, but chamber members still do have questions about the impact of the tax and on the ways in which the money would be spent.”
Right now, for every $10 you’re spending on Kauai, you’re paying 42 cents in General Excise Tax. If the proposed tax increase is accepted, that would up the tax bill to 47 cents for every $10 you spend. While that’s only a 5-cent increase, if you spend $1,000, you would pay $5.46 more in GET than you are right now.
The tax has been in place since the 1930s, but this year the state Legislature granted counties the right to establish a one-half percent surcharge, to be used mainly for transportation. Counties have until July 1 to enact an ordinance that would increase the tax from Jan. 1, 2018, until Dec. 31, 2027.
For the average household of two adults and two children, that would translate to a daily cost of living increase of about 56 cents. That means that living costs would go up a little more than $200 per year for a family of that size.
The money trail
In the next 10 years, the proposed GET increase would generate an estimated $255 million in revenue for the county. The lion’s share would go toward repairing, maintaining and building new roads.
The proposal directs $93 million to new transportation initiatives and projects like a new entry road in Kilauea, or new connectors in Kapaa between Kuhio Highway, the Kapaa Temporary Bypass and Olohena Road. That money would also include a bike and pedestrian path from Salt Pond to Hanapepe Heights, as well as a path between Kekaha and Waimea. The northern leg of the Western Bypass near Koloa is also included in the proposal.
The second-biggest chunk of the potential GET revenues, $63 million, is proposed to go toward road resurfacing and reconstruction.
“Our public works department did a survey of all the public roads that we have over the past two years and what’s needed is about $104 million in road repairs,” said the county’s finance director Ken Shimonishi. “So we’re thinking we can leverage that to get a $42 million federal match for repairs.”
Kauai’s public transit system would bring in about $63 million as well, with $18 million going toward a capitol expansion project for things like more shuttles and possible satellite baseyards on the North Shore and Westside. The plan appropriates another $45 million for operations expansion.
That money would encompass the county’s multimodal plan, which outlines how the county is going to change the distribution of transit on the island. Currently, 54 percent of folks on the island travel in a single-occupant vehicle most of the time. By the year 2035, the plan brings that number down to 39 percent by increasing the number of people walking, biking and using public transit around the island.
Of the leftover money, $17 million would go toward a vehicle and equipment repair shop that would consolidate the county’s transit, public works and fire department vehicles in one place for maintenance. Bridge improvements and highway equipment purchases would each garner $12 million.
To tax or not to tax
Councilmembers haven’t seen the draft of the bill and many of them haven’t seen the entire proposal, but they said they are familiar with it.
Councilman Ross Kagawa said he’s looking at the GET increase as a way for the county to make up around $13 million in lost Transient Accommodations Taxes.
“For the past four years, going on five, the state has kept our TAT so the GET is a way to fill that void, but I would want to see specifics on the plan and how they’re going to use the money,” Kagawa said. “I’m happy that we have an option to get that money we’ve been losing every year.”
Kagawa pointed out that the tax is regressive, however, and “some would say that’s the worst kind of tax because the poor ones are the ones that are hit the hardest.”
Councilman Gary Hooser said that’s his main concern with raising the GET.
“It’s a very regressive tax,” Hooser said. “It hits the working people — the middle- and low-income people — the hardest.”
Councilwoman JoAnn Yukimura said she’s concerned about the regressive nature of the tax as well.
“The lower-income and working-class families will pay a higher percentage of their income (in General Excise Taxes),” Yukimura said.
Yukimura said if a GET surcharge is enacted, she’d like to see most of the money go toward expanding public transit on the island. In fact, it was Yukimura’s desire to solve Kauai’s traffic problem that prompted her to lobby for the surcharge in the first place.
“I lobbied for that half-percent tax so that we could implement our multimodal plan,’ Yukimura said, “and if we’re not using that money for that main purpose, we’re not being strategic, in my opinion.”
Other options
In the calendar year 2018, the GET increase would add a little more than $20 million to the county’s income.
According to Shimonishi, it would take a fuel tax increase of 65 cents per gallon to generate that same amount of money in one year. Reaching that revenue using vehicle weight taxes would require a 6 cent per pound increase and generating that money using real property taxes would raise rates by 17 percent.
While they are presenting the proposal to groups throughout the island, Shimonishi said that they are waiting for the proposal to be put on the council’s agenda. If all goes according to plan, it will go to the council before year’s end.
