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 S.B. No. 2832 entitled:

begs leave to report as follows:

The purpose of this measure is to convert the State Liquor Tax from a gallonage tax to an ad valorem tax.

Your Committee received testimony in support of this measure from the Department of Taxation, the Department of Health, and Mothers Against Drunk Driving. Testimony in opposition to this measure was submitted by the Hawaii Hotel Association, Anheuser Busch Companies, Legislative Information Services of Hawaii, the Distilled Spirits Council of the United States, the Wine Institute, Tedeschi Vineyards, Ltd., the Hawaii Restaurant Association, Johnson Bros. of Hawaii, Inc., the Volcano Winery, and the Hawaii Liquor Wholesalers Association. The Tax Foundation of Hawaii submitted comments.

Your Committee finds that with the projected revenue shortfall and potential budget deficit, the State must look for ways to increase revenues. Therefore, your Committee supports increasing the Liquor Tax.

At the same time, your Committee finds that converting from a gallonage tax to an ad valorem tax will result in an unduly burdensome tax. Therefore, your Committee amended this measure to reinstate the gallonage tax, but to increase the tax rate for each category of liquor by 50%.

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 S.B. No. 2832, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2832, S.D. 1, and be placed on the calendar for Third Reading.