LIHUE — The new year brought a new hike for Kauai consumers.
The county opted to tack on a half-percent surcharge — the maximum amount authorized by the Legislature — making retail transactions subject to a 4.5-percent general excise tax starting Jan. 1. The county estimates the surcharge will generate about $25 million a year through 2030, with the extra tax revenue slated for transportation infrastructure.
“The County of Kauai anticipates receiving $12.5 million for the six months from Jan. 1, 2019, to June 30, 2019. As allowed under the GET surcharge, funding has been budgeted as follows: $7.6 million for road and bridge repairs, $4.581 million for transportation operations, $319k other transportation and road maintenance costs,” Director of Finance Reiko Matsuyama said in a statement Friday.
Business owners are keeping an eye on the new surcharge that also affects grocery purchases.
Lori Koga, owner of M Tanaka Store on Kalena Street in Lihue, said she is cautiously optimistic about the surcharge.
“We do need the help,” she said on Friday. “So if everybody gives a little, it could help a lot.”
Koga said the new tax could be an issue for some of her customers who plan to pay for work this month based on quotes they received in December. But how exactly that will play out remains to be seen. She said she hasn’t heard much feedback about the tax from her customers because it has only been in effect for a few days.
Hilmy Dole, president of the Royal Coconut Coast Association, a local business organization, said the surcharge hasn’t caused much of a stir so far among the business owners he has heard from.
“Right now there doesn’t seem to be much of an effect,” Dole said. “Nobody seems to be raising any eyebrows over the GET tax increase. We’re just going to keep an eye on it and see how things progress going into 2019.”
A tenant at Kukui Grove Center was not aware the county is authorized to increase the general excise tax.
“What? The tax went up?” the vendor said when informed about the half-percent increase. “I didn’t know. We have to make adjustments.”
Another vendor said a customer was getting irritated because her exchange amounted to a price differential of 24 cents increase between the time they got the item and today when the GET increase is in effect.
“They don’t understand,” the vendor said. “In the end, it was not worth getting the customer even more aggravated — Happy New Year!”
Vendors at the county’s Sunshine Market at Vidinha Stadium appeared to take the tax increase in stride.
“They keep saying they’ll send us a book with a scale, but in the end, it’s just that we have to pay what they bill us for,” said one farmer.
The employees at Ha Coffee Bar on Rice Street weren’t even aware of the tax increase at first.
Ashlin Matsuyama said she noticed the surcharge when the totals didn’t match the prices she was used to.
“I’ve worked here a long time, so I memorized a bunch of the prices,” she said. Earlier in the week, when a customer ordered a drink, Matsuyama told them, “It’s going to be $4.17. And I looked down, and it was $4.18.”
“I was lying to my customers!” Matsuyama said, laughing.
Kalon Pukini said none of his customers have noticed the change in prices so far. “No guest has mentioned it to me,” he said. “I didn’t even know it was going to be a thing.”
A shy barista, who didn’t want her name in the paper, said she learned about the surcharge when a customer mentioned it. “I had to look it up,” she said. “The government didn’t tell us.”
Advocates of the surcharge feel it is necessary in order to fund improvement projects.
“This funding will be critical to funding our road infrastructure and traffic congestion needs on our island,” former Mayor Bernard Carvalho Jr. said in December 2017, when the County Council approved the surcharge in a 6-1 vote with Councilman Ross Kagawa dissenting.
But some oppose the tax increase due to its regressive nature because it takes a heavier toll on the low-income bracket.
During her campaign in 2018, newly elected Councilwoman Felicia Cowden said the surcharge would not have gotten her vote. In an interview Saturday, Cowden reiterated her opinion on the tax, but said she feels the money generated by the surcharge will be put to good use filling potholes and making other necessary road improvements.
“I feel that general excise taxes are regressive and hardest on the people least able to pay,” Cowden said. “But since the decision is already made, I fully support it.”