Legislators kill bill to reduce state’s take of rail surcharge

A measure that would have reduced how much money the state pockets in exchange for collecting the tax used to fund Hono­lulu’s rail project died in this year’s legislative session.

The state keeps 10 percent of what’s collected under Oahu’s half-percent general excise tax surcharge, presumably to cover the added expense for the state Department of Taxation to administer that tax. That 10 percent is added to the state’s general fund. The rest helps to pay for the city’s elevated rail project, which is slated to start running trains in 2017.

The state has kept more than $100 million of Oahu’s GET surcharge since its collection began in 2007. Critics, including Mayor Kirk Caldwell, have argued the state’s 10 percent take is excessive.

In 2012 the state kept $21.2 million to administer the tax, according to city records, but the Tax Department’s entire budget that year was $23.7 million.

"The Legislature could not have intended to pay for nearly the entire operation of its Tax Department" with that 10 percent administrative fee, Caldwell said in testimony before lawmakers earlier this year.

A measure introduced by Rep. Ryan Yamane aimed to replace that 10 percent with a "reasonable amount," but it failed to make it out of the House Finance Committee.

The legislative session ended Thursday.

Committee Chairwoman Rep. Sylvia Luke and Yamane did not return calls for comment last week.

Caldwell said he doesn’t know why the measure failed, but added that he would lobby for it again next year "to get more of that … returned to help build rail."

State Tax Director Frederick Pablo said Thursday he doesn’t know how much extra it costs his department to administer the Oahu surcharge. If the 10 percent rate remains in place, the state would withhold more than $370 million for collecting the surcharge by the time the rail project is finished, based on current cost projections.