Armed with an opinion from the state attorney general, Mayor Harry Kim is asking the County Council to consider raising the general excise tax.
After first rejecting the tax, the County Council last year passed a half-size measure, reducing the half-cent surcharge to one-quarter cent and shortening the duration to Dec. 31, 2020, rather than the Dec. 31, 2030, the end date allowed by the Legislature. Collection of the tax began Jan. 1.
The current one-quarter cent on a dollar brings in about $25 million annually; the county could take in $50 million if it were doubled to one-half cent.
Because the tax is itself taxed, the 0.25 percent tax on a $100 purchase increases the price by 26 cents, raising the purchase from $104.17 to $104.43, once the 4 percent state GET is also taken into account.
Kim said a new council makeup and continued budget pressure from the ongoing Kilauea eruption recovery efforts might lead to an outcome more advantageous for the county. There are three new council members, with the two members on the “no” side of a 7-2 vote, former Kona Councilman Dru Kanuha and former Puna Councilwoman Jen Ruggles, no longer on the council.
He’s also asking the state Legislature for more flexibility in using the tax money, so half of it could be used for something other than roads, bridges, trails and mass transit.
The mayor asked for an attorney general opinion after county attorneys were unclear about whether the state allowed a do-over when it extended the time county governments could consider the tax to March 31 of this year.
“It does make a difference,” Kim said Monday. “We should give the new County Council the opportunity to consider this. This gives us the opportunity to revisit this, and I took it.”
The council Finance Committee is expected to consider the mayor’s proposal Feb. 4 if the administration meets Wednesday’s deadline, said Chairwoman Maile David.
The current quarter-cent translates into $2.27 monthly for a household spending $10,000 annually on taxed items, $11.36 monthly for those spending $50,000 annually and $22.72 monthly for those spending $100,000 annually, according to the administration. The tax isn’t applied on most medications or on SNAP food assistance.
Council Chairman Aaron Chung, who pushed the council to adopt the full half-cent last year rather than what he called Monday “a watered-down version,” said he’s not sponsoring the measure, but he will support it.
“No one likes additional taxes, but at least this is spread evenly,” Chung said, adding that tourists pay a significant part of the tax. “I think the benefits far outweigh the negatives.”
Former Attorney General Russell Suzuki’s opinion came in a Nov. 26 letter to state House Finance Committee Chairwoman Sylvia Luke.
“The legislative history does not discuss whether the counties have only one opportunity to pass an ordinance to establish the surcharge and does not discuss whether amendments to the surcharge, once initially established, can be made,” he said in the letter.
“We believe that Act 11 does not prohibit Hawaii County from passing another ordinance prior to March 31, 2019, that amends the surcharge initially established by Ordinance No. 1874,” Suzuki added. “This interpretation avoids an unjust or unintended result and is supported by the principle that express statutory authority includes the implied authority reasonably necessary to implement the authority expressly granted.”
Luke said she wanted clarification so the county would better understand its options.
“It’s something we’re asking them if they’d find useful,” Luke said about the chance for the county to pass a new ordinance increasing the tax. “Just to get clarity so there’s no confusion. … Now it seems that everybody is on the same issue.”
Email Nancy Cook Lauer at ncook-lauer@westhawaiitoday.com.
