WMTA Shares these commentaries, without taking a position unless otherwise noted, to bring information to our readers
​To view the archives of the Tax Foundation of Hawaii's commentary click here. ​​​​​​​
 
Weekly Commentary

For the Week of October 14, 2018
 
Whither the General Income Tax Credit!
By Tom Yamachika, President
 
Those of us who are getting along in years may remember the “general income tax credit,” a line on our state income tax return where we could claim a one-dollar ($1) credit.  The saga of this credit tells us a little about a bold move undertaken in the 1978 Constitutional Convention and our lawmakers’ reaction, which was to beat it into insignificance within a couple of years.

The last time we had a constitutional convention, in 1978, delegates thought that government shouldn’t be keeping the people’s money if it didn’t have to.  “Your Committee believes that it is proper for the State's taxpayers to benefit from any surplus in the State's general fund balance,” they said in Committee of the Whole Report No. 14. 

So, they put before the voters, and the voters approved, what became Article VII, section 6 of our Constitution.  It says that if our general fund balance is more than 5% of general fund revenues for two fiscal years in a row, then the legislature is supposed to enact a tax credit or refund to give some of that money back to us taxpayers. 

This credit came to be called the general income tax credit. 

In the first year the provision was effective, 1981, the surplus requirements were met, and lawmakers gave the taxpayers a credit of $100 per head.
 
In 1982, the surplus requirement was met again, but lawmakers thought that $100 was a little much. So, they knocked it down to $25.

In 1983, the surplus requirement was met again, and lawmakers apparently decided that this dumb credit was getting in the way of good budgeting.  They slashed it to $1.

For the next five years in a row, the surplus requirement was met again, and lawmakers gave the taxpayers a credit of $1 in each of those years. 

In 1989, with Hawaii’s economy apparently on a roll, lawmakers generously approved a $125 general income tax credit!  It didn’t take long for cooler heads to prevail, however.  The credit was cut to $60 the following year, and in 1991—yes, you guessed it—we were back to $1, where we stayed through 1995.
 
In 1996, the surplus requirement was not met.  No credit was required, and none was given.  This continued through 2000. 

In 2001, we once again met the surplus requirement.  Once again lawmakers gave us a $1 credit.  The same happened in 2002. 

For the years 2003-2006, the surplus requirement wasn’t met.

In 2007, state coffers were in great shape and the general income tax credit again sprung to life.  This time lawmakers tiered it so more would be given to poorer people.  It ranged from zero to $160. 

In 2008 and 2009, the economy sunk but the surplus requirement was met.  Two more years of a $1 credit resulted. 

In 2010, the legislature proposed, and voters approved, a constitutional amendment that allowed lawmakers to forgo providing a tax credit if they instead shoved some money into our rainy-day fund.  Thus 2009 was the last year of the general income tax credit. 

Source:  Hawaii Department of Taxation Reports
 
With that history, do you think the intent of the constitutional convention delegates was met?  Or do you think lawmakers acted like slippery eels and dodged the provision?  If voters think it’s a good idea to tell lawmakers to curb the growth of government, maybe they should consider a constitutional convention where limitations like this one can again be considered, with, hopefully, some reasonable parameters that assure goals are met. ​

WMTA Shares these commentaries, without taking a position unless otherwise noted, to bring information to our readers
​To view the archives of the Tax Foundation of Hawaii's commentary click here. ​​​​​​​
 
Weekly Commentary

For the Week of September 30, 2018
 
Guess Which Agency Can Impose State Tax?
By Tom Yamachika, President
 
Lots of the controversy swirling around the ballot measure seeking to impose a “surcharge” on investment property to support public education involves our Department of Education (DOE).  The DOE currently receives an appropriation from the State’s General Fund of about $2 billion and is also able to pull from other funding sources such as federal funds.

But did you know that the DOE can also impose tax?

The Hawaii Revised Statutes contains twelve sections  relating to “school impact fees,” starting with section 302A-1601.  The law states, in part, “New residential developments within identified school impact districts create additional demand for public school facilities.  As such, once school impact districts are identified, new residential developments shall be required to contribute toward the construction of new or expansion of existing public school facilities.”

Builders of large projects within school impact districts are required to provide land for school facilities depending on the numbers of students expected in their projects and the amount of available classroom space in existing area schools.  Smaller developers and individual home owner-builders are required to pay a fee instead of land, when their project is too small to entertain a school site.  All home builders or buyers must pay a construction cost fee.

This law, which we have discussed before, recently has been used to create a “school impact district” that goes from Kalihi to Ala Moana.  It’s defined as the areas served by the following elementary schools: Fern, Kalihi Kai, KalihiWaena, Linapuni and Puuhale in the Farrington Complex; and Kaahumanu, Kaiulani, Kauluwela, Likelike and Royal in the McKinley Complex.  Yes, the impact district “tracks” the path of the new Honolulu rail line, pardon the pun. 

In a news release, the DOE announced that the fee, which goes into effect on October 1, will be $3,864 per unit.

That fee is considerably cheaper than the $9,374 proposed two years ago, but it’s not chicken feed by any means.  Multiplying the current fee by the 39,000 additional dwelling units that the DOE is anticipating yields more than $150 million, many times more than the $4.7 million in school impact fees it has collected to date for districts in Leeward Oahu, West Maui and Central Maui.

These fees, of course, are going to have to be paid by someone.  If you think they are all paid by wealthy, fat cat developers who are going to be swimming in money because of the transient oriented development, think again.  These costs get passed along to home buyers or renters, in one form or another.

According to its audited financial statements for fiscal 2017, our DOE’s total revenues were $2.915 billion and total expenses were $2.817 billion.  A recent Star-Advertiser article (Aug. 19, 2018) raises questions about whether the DOE is entitled to tens of millions more in federal reimbursements (and we will write about this next week).  And, of course, it is the only state agency with independent taxing power.

Let’s now turn our attention to making sure that all entitled revenues are being properly claimed and those billions of dollars are being spent efficiently and wisely.​

Joseph Pluta
West Maui Taxpayers Association
Phone: 808-661-7990

FOR IMMEDIATE PRESS RELEASE--

The West Maui Taxpayers Association (WMTA) invite you to attend the WMTA 2018 Candidates Night. Wednesday, October 24, 2018, at 5:00 pm and will be at the Lahaina Senior Center located at 788 Pauoa St, Lahaina, HI 96761

The WMTA Candidates Night is the only forum of its kind in West Maui – and will feature the Candidates for the following: State Senator District 06, State Representative District 10, Maui Mayor, and Maui County Councilmember-all districts. West Maui is a unique and vibrant community that provides employment opportunities and generates significant tax revenues for the all levels of government. WMTA is also unique in that our mission is to promote efficient use of the taxes generated to invest in infrastructure, services and amenities that help ensure that West Maui remains one of the best places to live, work and visit in the world.

As the WMTA Candidates Night is for West Maui voter education, we ask that any candidate attending please refrain from bringing a large contingent of supporters. No signs, banners or other campaign materials will be allowed inside the Civic Center, and all election activities must be conducted outside. Anyone displaying disruptive or disrespectful behavior will be asked to leave. There will be a dinner service provided by local businesses and restaurants.
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For any questions, please email wmta@maui.net or call 808-661-7990