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. 2381, H.D. 1, entitled:

begs leave to report as follows:

The purpose of this measure, as referred to your Committee, was to establish a one-time tax amnesty period to encourage delinquent filers to reconcile their accounts with the State.

Prior to the hearing on this measure, your Committee circulated a Proposed S.D. 1 version that replaced the original contents of the measure with a new proposal to increase the State's liquor tax by 50%.

Testimony in support of the Proposed S.D. 1 was received from the Department of Taxation and the Department of Health.

Testimony in opposition to the Proposed S.D. 1 was submitted by the Distilled Spirits Council of the United States, a restaurant operator, the Legislative Center, Hawaii Beverage Guide, the Vice President and Executive Vice President of Southern Wine and Spirits of Hawaii, Gordon Biersch, Maui's Winery, Johnson Brothers of Hawaii, Jose's, Inc., Chili's Bar and Grill, Nashville Waikiki, M&S Brokerage, Inc., the Libertarian Party of Hawaii, the Hawaii Restaurant Association, Volcano Winery, the Hawaii Liquor Wholesalers Association, the Hawaii Hotel Association, the Wine Institute, the Hawaii Food Industry Association, and five concerned citizens. The Tax Foundation of Hawaii submitted comments.

Hawaii's looming budget deficit has been well documented, and your Committee has tried valiantly to search for additional sources of revenue to balance the budget. Even with further cuts to state government, raising the liquor tax is one part of a solution to raising additional revenues.

Your Committee recognizes that Hawaii's liquor tax is already among the highest in the nation, however, your Committee notes that the State Constitution requires a balanced budget, and so this increase is necessary. Also, your Committee notes that it is better to tax activities that are perceived as unhealthy or immoral in the community, rather than to impose a tax that affects everyone.

Your Committee amended this measure to increase the liquor tax by 25%, rather than 50%. Your Committee believes this amendment addresses some of the concerns raised and is a fair compromise.

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. 2381, H.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 2381, H.D. 1, S.D. 1, and be placed on the calendar for Third Reading.