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Tax Foundation sues state for skimming rail tax

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The Tax Foundation of Hawaii filed a lawsuit today in state court challenging the state’s practice of “skimming” off 10 percent of the money collected under the half-percent Oahu excise tax surcharge that was established to pay for the city’s rail transit project. 

Tom Yamachika, president of the Tax Foundation, said the state is taking far more money from the surcharge revenues than it needs to administer the excise tax surcharge for the city, and said that practice by the state violates the Hawaii State Constitution and state law. 

The lawsuit seeks an injunction that would prevent the state from taking tens of millions of dollars each year from the excise tax surcharge proceeds. Yamachika estimated that ongoing practice has allowed the state to divert more than $160 million so far in surcharge revenue into state coffers. 

Yamachika described that as “a hidden state tax unwittingly paid by Oahu residents and businesses.” He said most of that money should either be applied toward the cost of the rail project, or should be refunded to taxpayers.

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