Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2002

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred H.B. No. 1823, H.D. 1, S.D. 1, entitled:

begs leave to report as follows:

The purpose of this measure is to provide a general excise tax exemption for all sales of good and services made to the State, including sales on contracting.

The bill also repeals all exemptions to the central services expenses and departmental administrative expenses assessments and proposes an unspecified percentage for the current five per cent central services assessment.

Your Committee finds that reducing state expenditures remains a priority for the Legislature. One way to reduce state spending is to exempt the general excise tax on sales made to the State, especially sales relating to capital improvements. Since the tax is calculated into the cost of capital improvement projects, the tax necessarily increases the cost of not only the project itself, but also the cost of financing the project, as well as the resulting debt service.

This bill provides a general excise tax exemption for sales relating to capital improvement projects to reduce the cost of such projects to ultimately reduce state expenditures and the cost of state government.

The bill also takes effect on July 1, 2050, in order to promote continued discussion on this matter.

As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1823, H.D. 1, S.D. 1, and recommends that it pass Third Reading.