On Politics: Counties get taste of GET and want bigger portion of tax

Last year, the Big Island’s historic eruptions and ensuing lava flows covered, burned or destroyed some $400 million in Hawaii County real property. On the other end of the island chain, Kauai suffered major property damage caused by 2018 storms, including record-setting rains.

“The (Hawaii) County has deemed the homes and lots to have zero value; even if some houses survived and are still standing, the county still estimated them as having no value as the properties cannot be used, sold or even accessed,” the Honolulu Star-Advertiser reported last year.

County governments can only keep growing if real estate prices also spiral upward.

If home prices go down, value goes down and tax collections go down. Ten percent of a million dollars is more than 10 percent of $750,000.

What to do? Kauai and the Big Island must pay their staffs, make their electric bills and gas up the county buses.

Remember that the Big Island and Kauai county leaders last year got a little present from the state Legislature.

When the state bailed out Honolulu’s overbudget rail line by extending the general excise tax surcharge, it tacked on a neighbor island option of raising the GET collected on their islands for transportation-related expenses. Want to fix your roads, buy buses or traffic lights? You have the option of raising the GET by up to half or 1 percent.

The Big Island took only half of the possible increase but now is moving to get the whole half or 1 percent increase. Mayor Harry Kim, however, is already saying that isn’t going to be enough. Newly elected Kauai Mayor Derek Kawakami is also looking at the budget and said he will need more money because of the dropping tax base.

The thing about taxes, however, is that even if they are tough to get, they are almost impossible to give up. So now that Kauai and Hawaii island have a taste of a new tax, the GET, they like it and they want more of it.

The GET is strong stuff — basically, if money in Hawaii changes hands, the state gets a piece of the action; it doesn’t matter if you are sick, hungry or just a kid, the state wants in on the deal. Whether you are selling shoes, fixing teeth or building bookshelves, the state says “gimme.”

Before the state gave the counties a whiff of the GET, the only thing the counties could tax was real property, like houses, hotels and land.

But, the Legislature does not appear ready to share the power. I talked to both state Sen. Donovan Dela Cruz, the Ways and Means chairman, and state Rep. Sylvia Luke, the Finance chairwoman.

They are both legislative and political veterans. Luke helped write the laws allowing the counties to share the GET, and Dela Cruz is a former Honolulu City Council chairman who knows exactly how much the counties want another way to raise taxes.

Dela Cruz advises Kim and Kawakami to “reprioritize”: Take the budget money you had for roads and put it in salaries and make up the road money with the GET.

Luke also doesn’t like the philosophy of a county GET tax raid.

“GET authority results in a shell game where the Legislature says, we authorized it without taking on the responsibility of higher taxation,” Luke told me. “If the counties become over-dependent on the GET, it will be difficult for the future Legislature to sunset the authority, thereby essentially making it a permanent tax increase.”

It will be up to the counties to figure out another way besides just asking for new, never-envisioned taxing powers — because this Legislature is not giving up its power.

Richard Borreca writes on politics on Sundays. Reach him at 808onpolitics@gmail.com.