Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committee on Transportation, to which was referred H.B. No. 2226 entitled:

begs leave to report as follows:

The purpose of this bill is to establish a commercial airline tax credit to encourage commercial airline operators to base more flight crews in Hawaii.

Several pilots testified in support of this bill. The Department of Taxation (DoTAX) opposed this measure. The Tax Foundation of Hawaii commented on this measure.

Airline executives routinely use cost considerations as a major factor when making decisions on where to base flight crews. Recent events have caused commercial airlines to either eliminate or severely scale back their flight crew domiciles in Hawaii, causing an estimated loss of over 2,000 jobs. According to estimates by DoTAX, income taxes lost from these jobs ranged from $5,600 for flight attendants to $21,000 for a typical pilot. These estimates amount to millions of dollars in tax revenue being lost. Additionally, jobs that supported the flight crew bases in Hawaii were also lost, further decreasing tax revenues.

Your Committee finds that the possibility of increased tax revenue income, as well as benefits that may be realized by businesses from expenditures made by flight crews based in Hawaii, outweigh the concerns of DoTAX regarding the loss of revenue the State would incur by allowing commercial airlines to take these tax credits.

As affirmed by the record of votes of the members of your Committee on Transportation that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 2226 and recommends that it pass Second Reading and be referred to the Committee on Finance.