STAND. COM. REP. NO. 1596_______

                                 Honolulu, Hawaii
                                                   , 1999

                                 RE: H.C.R. No. 230
                                     H.D. 1




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Economic Development and Business
Concerns, to which was referred H.C.R. No. 230 entitled: 

     "HOUSE CONCURRENT RESOLUTION REQUESTING THE DEPARTMENT OF
     BUSINESS, ECONOMIC DEVELOPMENT, AND TOURISM, WITH THE
     ASSISTANCE OF THE DEPARTMENT OF TAXATION, TO STUDY THE
     FEASIBILITY OF REPLACING THE INCOME TAX AND GENERAL EXCISE
     TAX WITH A NEW RETAIL SALES TAX,"

begs leave to report as follows:

     The purpose of this measure is to request the Department of
Business, Economic Development, and Tourism to study the
feasibility of replacing the income and general excise taxes with
a new retail sales tax and to prepare an economic impact analysis
report on the effects of restructuring the state tax system,
including:

     (1)  Cost estimates of the proposed conversion to a retail
          sales tax, including anticipated administrative costs;

     (2)  The anticipated economic impact on taxpayers in Hawaii
          arising from the conversion;

     (3)  The expected percentage of the sales tax that will be
          borne by visitors to Hawaii who purchase Hawaii goods
          and services;

     (4)  The anticipated impact on the collection of state tax
          revenues in Hawaii;

 
 
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     (5)  The expected rate at which the new sales tax must be
          established in order to generate sufficient revenues to
          replace the general excise and income taxes; and

     (6)  Any other information that the Department considers to
          be appropriate for policy makers;

     Testimony in support of this measure was submitted by the
National Federation of Independent Business (NFIB).  Testimony in
support of the intent of this measure was submitted by the
Department of Business, Economic Development, and Tourism and the
Department of Taxation, which also provided recommendations. 

     Your Committee has amended this measure by the following:

     (1)  Amending the title of the resolution by deleting
          mention of the agencies responsible for providing the
          report;

     (2)  Adding language that the report should consider
          replacing the general excise tax and the income tax
          with a new retail tax or other tax;

     (3)  Providing that the Department of Business, Economic
          Development, and Tourism and the Department of Taxation
          would be responsible for conducting the report, with
          assistance from the Legislative Reference Bureau; and

     (4)  Making technical, nonsubstantive amendments for
          purposes of clarity and style.

     As affirmed by the record of votes of the members of your
Committee on Economic Development and Business Concerns that is
attached to this report, your Committee concurs with the intent
and purpose of H.C.R. No. 230, as amended herein, and recommends
that it be referred to the Committee on Finance, in the form
attached hereto as H.C.R. No. 230, H.D. 1.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Economic
                                   Development and Business
                                   Concerns,



                                   ______________________________
                                   ROBERT N. HERKES, Chair