STAND. COM. REP. NO. 367

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  S.B. No. 17
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Transportation and Intergovernmental
Affairs, to which was referred S.B. No. 17 entitled: 

     "A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose of this measure is to reimburse the counties for
amounts of general excise tax passed on to them by businesses.

     Testimony in support of this measure was received from the
Department of Budget of the City and County of Honolulu, Office
of the Mayor, Maui County, County Council of Maui County, County
Council of Hawaii County, and the Department of Finance of Hawaii
County.  The Department of Budget and Finance and the Tax
Foundation of Hawaii submitted comments on this measure.

     The Department of Taxation submitted testimony opposing this
measure.

     Your Committee finds that it is currently estimated that the
counties pay approximately $30 million a year in general excise
taxes passed on to them by businesses.  Your Committee recognizes
the present fiscal situation in the counties, and believes that
the legislature should assist the counties by alleviating the
burden of the general excise tax.

     Your Committee has amended this measure by deleting its
contents and substituting more specific and substantial
provisions that will allow each county to apply to the director

 
a                                                     SB17 SD1
                                   STAND. COM. REP. NO. 367
                                   Page 2


of finance for a reimbursement of the general excise taxes passed
on to the county by a business.  

     The amendments made by your Committee will allow the
counties to apply on a semi-annual basis for a reimbursement of
the general excise taxes paid.  The counties are required to
submit an itemized claim for the reimbursement that the director
of finance may accept or may request proof to justify the claim.
Section 237-31, Hawaii Revised Statutes, is amended to allow the
director of finance to keep sufficient moneys collected under the
general excise tax in special accounts to pay to the counties.
This will work in the same manner as transient accommodations tax
transfers to the county.

     While your Committee realizes that the current fiscal
situation in the counties requires state assistance, the State's
fiscal situation does not allow the immediate full reimbursement
of general excise taxes to the counties.  Your Committee,
therefore, has provided for a four-year phase-in of the
reimbursements.

     As affirmed by the record of votes of the members of your
Committee on Transportation and Intergovernmental Affairs that is
attached to this report, your Committee is in accord with the
intent and purpose of S.B. No. 17, as amended herein, and
recommends that it pass Second Reading in the form attached
hereto as S.B. No. 17, S.D. 1, and be referred to the Committee
on Ways and Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Transportation
                                   and Intergovernmental Affairs,



                                   ______________________________
                                   CAL KAWAMOTO, Chair

 
a                                                     SB17 SD1