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The Enola Gay (bill) has left the hangar

What we have been seeing at the Legislature in terms of bills proposing new taxes has been relatively tame.

Until now, that is.

Senate Bill 56, with the ominous title “Relating to Revenue Generation,” has been granted its first hearing by the Senate Ways and Means Committee. It has officially started its journey through the legislative gauntlet.

Why do I call this bill “the Enola Gay?” You might remember from the history books that Enola Gay is the name of the aircraft that dropped the first atomic bomb on the city of Hiroshima in World War II. Here, of course, the bill’s destination isn’t Japan, it’s the pocketbooks of us the taxpayers.

Here’s what the payload contains:

There is an income-tax hike. The top income-tax rate in the bill is 13% for single filers with more than $250,000 in taxable income, or for couples with more than $500,000 taxable income. The previous top tax rate was 11%. The top tax rate on capital gains is hoisted to 11% from 7.25%.

The new tax brackets also are designed to get rid of the effects of low tax brackets on higher-income taxpayers.

Corporations, which used to be subject to tax rates of 4.4% to 6.4%, are taxed at a flat rate of 9.6%.

Next, we go to general-excise and use tax. The bill suspends, for two years beginning July 1, 2021, some 20 different exemptions that are now allowed under the GET law, and six different exemptions that are now allowed under the use tax law. This hearkens back to the same exemption suspension that was in effect exactly 10 years prior to the suspension period now proposed.

And, finally, we have the conveyance tax. The tax rate stays the same for properties sold for $1 million and under, but is doubled for those selling for more. And if the property is a condominium or single-family residence for which the purchaser is ineligible for a county homeowner’s exemption, the tax is increased further. For such properties with a value of $10 million or more, the tax goes from 1% to 2.5%.

The proposed suspension of exemptions lasts two years. All of the other rate increases proposed are permanent.

The preamble to the bill trying to justify the increases says that we are in a pandemic and state government needs “to generate revenue to allow the state to meet its strategic goals, avoid furloughs and layoffs for state workers, and prevent disruptions to essential government services.”

Pandemics don’t last forever, however. These tax increases do.

Another passage in the bill’s preamble recites that “the University of Hawaii Economic Research Organization has found that every $1 in state-salary reductions results in a $1.50 decrease in overall economic activity.”

And what then happens with all the jobs outside of the public sector that are rapidly disappearing because businesses big and small can’t make ends meet? Are those simply ignored in thinking about economic activity? And, I repeat, in the private sector we are not simply talking about salary reductions and furloughs. Those are happening too, but we are seeing layoffs and business closures.

Lawmakers, are you going to let this Enola Gay drop the bomb on an economy already reeling from the pandemic? And taxpayers, if you have opinions on the subject that you want your lawmakers to know about, now may be a very good time to let your voices be heard.


Tom Yamachika is president of the Tax Foundation of Hawai‘i.

  1. Mark Spenc March 7, 2021 4:28 am Reply

    Say it ain’t so, a totally democratically held state gonna raise your taxes, no. Can’t be. Never gonna happen. Wonderful liberals that totally control every aspect of Hawaiian life, from education to media local government and overall thought control would never raise taxes at a time like this. Y’all better re-think what you just wrote here. everybody knows aint no Enola Gay round here.

  2. Ruta Jordans March 7, 2021 9:37 am Reply

    Tom, I have appreciated your articles in the past, which enlightened us on the effects of proposed changes in taxes. This time I agree with you that SB56 is a bomb. But, unlike you, I believe it is a positive bomb for Hawaii’s tax structure. It is a change that is greatly needed. Read some of the testimony in support of the bill. When a fulltime worker can not afford a place to live while the rich get richer on the stock market, buy multimillion dollar estates, and pay a smaller percent of their income on taxes, there is something very wrong with the system. This bomb SB56 sounds like just what is needed.

  3. Across_the_pond March 8, 2021 9:42 pm Reply

    Bombs away SB56. The hike is necessary, and it’s not like they’re asking for half your money. Only the greedy rich would object.

  4. nothings free March 9, 2021 8:17 am Reply

    There are too many taxes on too many of us already! Since Democrats are so inept at running anything, especially a large city, state, federal government, or any business of any kind, their only solution to every problem is tax the hell out of someone, throw money at it, print more if needed, and stick as much of it as possible in your own pocket as it passes through the system. We are now experiencing the freak show that is Liberal buffoonery!

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