The half-percent state excise tax surcharge to fund construction of Honolulu rail and neighbor island transportation projects doesn’t expire until 2030 — a decade later than promised, before rail ran $5 billion over budget, 11 years behind schedule and needed two state bailouts.
But state and county politicians are already fighting over who will get the bounty from the surcharge when its dedication to rail and county roads ends in six years.
Honolulu officials always hoped the Legislature would continue the rail tax in perpetuity to cover future cost overruns, failure to plan for hundreds of millions in annual rail operations and expanding the line if anything is left.
Neighbor island leaders argue the funds are essential to maintaining their transportation
infrastructure.
Covetous state legislators, however, want to cut counties off when rail is scheduled for completion in 2031 and redirect the revenue — some $430 million in 2023 — to state education and social programs.
A measure to do that, House Bill 2781, was introduced by House Finance Chairman Kyle Yamashita and heard by his committee last week. After hearing county objections, the influential Yamashita shelved the bill for now but signaled the plan will be back.
Unsurprisingly, no power players pushed for keeping the original promise of simply letting the surcharge expire when rail is completed to relieve Hawaii’s oppressive cost of living and give suffering taxpayers a break.
Instead of viewing it as an opportunity for a money grab, lawmakers should use the six-year lead time as a chance to untangle Hawaii’s jumbled tax matrix that clips local taxpayers at one of the highest rates in the nation while averting clear political accountability.
The state gets most of its revenue from the general excise and income taxes, while the counties have the property tax. The transient accommodations tax was supposed to compensate both for the cost of hosting tourists. Pretty straightforward.
Things became complicated when Honolulu
got rail funding from the state excise tax, for which city elected officials are not accountable, and in turn state legislators tried to raid the county property tax, for which they are not accountable, to fund education.
The Legislature hijacked counties’ shares of the TAT and instead empowered them to levy their own tourist tax, resulting in an overall tax increase nobody was really accountable for.
To understand the impact of such lack of accountability, imagine how differently Honolulu rail might have gone — if it got off the ground at all — if the mayor and Council had to fund it from property taxes they answered for.
The state appoints a Tax Review Commission every five years to conduct a systematic study of Hawaii’s tax structure, but its work is often little publicized and the report gathers dust on legislative bookshelves.
The governor and Legislature should make a
priority of untangling our tax mess by assuring
the next commission in 2025 has respected independent expertise, transparency and heavy public input.
The panel should be composed not of insiders and “stakeholders” wanting a bigger piece of the pie, but true, honest brokers who can fairly assess needs, determine what we can afford and suggest an equitable tax balance.
Reach David Shapiro at volcanicash@gmail.com.