State House Speaker Joseph Souki on Wednesday called for bold shifts in tax policy, urging the state to give the counties a greater share of hotel room tax revenue, collect taxes on Internet commerce and impose a pension tax on wealthy seniors.
Souki suggested raising the $93 million annual cap on hotel room tax revenue that goes to the counties to $141 million, perhaps over several years, a recognition that the counties cover police, lifeguard, parks and other services used by tourists.
State lawmakers temporarily increased the hotel room tax in 2009 to help survive the recession and made the higher rate permanent last session. The cap on the amount given to the counties has been a sore point for mayors who have also been under financial pressure.
The state collected about $368 million from the transient accommodations tax — or hotel room tax — last fiscal year.
"It’s time," Souki (D, Waihee-Waiehu-Wailuku) said on the opening day of the new session. "I believe the gesture is not only long overdue, but should be viewed as a better long-term investment in our counties and in our No. 1 industry."
Honolulu Mayor Kirk Caldwell described Souki’s hotel room tax proposal as a "present" to the counties. County mayors asked lawmakers on Wednesday for the authority to add 1 percent general-excise tax surcharges as a finance option, a sign of the long-term budget challenges counties are facing.
For the past<$o($)> several years, the House and Senate have debated different ways to capture the taxes Hawaii consumers owe on Internet purchases but routinely fail to pay. The U.S. Supreme Court’s decision in December not to hear an appeal of a New York court ruling that required Internet retailers like Amazon.com to collect state sales taxes from consumers, regardless of whether the retailers have a physical presence in the state, was widely seen as an opening for other states or Congress to act.
Hawaii, which could be losing out on $30 million or more a year in tax revenue, could either adopt a new tax collection mandate on Internet commerce or band with other states in a consortium known as the Streamlined Sales Tax Project.
"Technology has revolutionized the way companies do business throughout the world," Souki said. "And that’s amazing and wonderful. But every day they compete toe-to-toe with local companies on a playing field that is clearly tilted in their favor. It’s time we level the playing field."
Souki’s proposal to tax seniors with pensions of $100,000 a year or more was immediately doused by the Senate.
Gov. Neil Abercrombie was vilified for recommending a pension tax in 2011, which was limited to high-income seniors by the House before it was rejected by the Senate. The House’s version would have generated about $17 million a year, money that is not needed today given the state’s budget surplus and — for many lawmakers — not worth the political turmoil in an election year.
Souki told reporters that a pension tax was merely a "talking point" — a move that could bring more equity to the tax code, since Hawaii is among 10 states that do not tax pensions — but Senate leaders swiftly dismissed the idea.
"We are not going to tax pensions," said Sen. David Ige (D, Pearl Harbor-Pearl City-Aiea), the chairman of the Senate Ways and Means Committee, who fought a pension tax three years ago.
Senate President Donna Mercado Kim (D, Kalihi Valley-Moanalua-Halawa) also indicated that the Senate would take a skeptical look at raising the cap on hotel room tax revenue to the counties or granting the counties’ request for GET surcharge authority. Counties were given GET surcharge authority for transportation several years ago, but only Oahu — in a 0.5 percent surcharge used to help finance the Honolulu rail project — took advantage of the option.
Kim, a former Honolulu City Councilwoman, has also offered the counties sales tax authority in the past, which the counties did not embrace.
"I’m not sure that — at this point in time — that the Legislature will be looking at giving up some of the taxing authority," Kim said. "But certainly that will be discussed."
A pension tax was not the only wild card from Souki on Wednesday. House leaders have said privately that they would likely not take up marijuana-related legislation this session. But Souki suggested that the state establish marijuana dispensaries so medical-marijuana patients could legally and safely obtain the drug. Patients must now grow their own marijuana or buy it on the black market.
Souki— a cagey legislative strategist who, at 80, has been rejuvenated by his second stint as House speaker — seemed to enjoy the chance to speak on a day when the House and Senate celebrated the 55th anniversary of statehood by honoring former lawmakers. He spoke of vision — "with a capital ‘V.’"
"Be a visionary in a way that many of your predecessors here today were," he implored younger lawmakers. "Be careful and conservative when it comes to the public welfare and finances. But where your own careers are concerned, take a chance; take up the challenges facing you and all of us.
"Be bold and look beyond your own well-being, and today’s needs."
Kim used her opening day speech more as a progress report than an opportunity to announce new proposals. She said senators had worked over the interim gathering information on genetically modified organisms, health care reform, solar power, economic development, invasive species, and the homeless.
She said senators would revisit the debate over whether to increase the minimum wage.
Senate Minority Leader Sam Slom (R, Diamond Head-Kahala-Hawaii Kai) said the state’s economy has not rebounded across the board. He warned against what he sees as a disturbing sense of entitlement — "a growing clamor by those who think they are entitled to the fruits of other people’s labors."
House Minority Leader Aaron Ling Johanson (R, Fort Shafter-Moanalua Gardens-Aliamanu) said House Republicans would like to link state income tax rates to the Consumer Price Index to help offset the high cost of living in the islands. He also recommended mandatory kindergarten, an idea shared with Rep. Roy Takumi (D, Pearl City-Waipio-Pearl Harbor), the chairman of the House Education Committee.
Johanson and Slom both called for a constitutional amendment on initiative and referendum, which they maintain would increase voter participation in a state with perennially low voter turnout.