Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committee on Health and Human Services, to which was referred S.B. No. 1576 entitled:

begs leave to report as follows:

The purpose of this measure is to exempt from the general excise tax income of assisted living facilities.

Your Committee received testimony in opposition to this measure from the Department of Taxation. The Tax Foundation of Hawaii submitted comments.

The general excise tax in Hawaii is a very productive and efficient means of raising revenue. Everything sold, wherever in the chain from manufacture to consumer purchase, is subject to the excise tax. Your Committee believes that it is generally bad tax policy to create exemptions from the excise tax. The general excise tax law, however, is currently replete with exemptions. Your Committee finds that Hawaii's people should not have to pay an excise tax on the purchase of basic necessities like food, medical services and supplies, over-the-counter nonprescription medications, rentals, education, and other business related activities. Although the measure reported out of this Committee does not include all these exemptions, your Committee requests the Committee on Ways and Means to seriously consider inserting rentals, education, and other business related activities.

Your Committee has amended this measure by:

This measure, as amended, would help to ameliorate the effects of a high cost of living, especially for the lower income bracket wage earners, and would serve to make food and medical services more affordable, especially for the uninsured. Your Committee anticipates that the amended measure would also favorably impact on the Medicaid reimbursements of the State under the QUEST program by lowering the cost to the State of paying medical providers.

As affirmed by the record of votes of the members of your Committee on Health and Human Services that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1576, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1576, S.D. 1, and be referred to the Committee on Ways and Means.