Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2006

State of Hawaii

Sir:

Your Committee on Health, to which was referred S.B. No. 2508 entitled:

begs leave to report as follows:

The purpose of this measure is to exempt medical services and equipment from the general excise tax.

Your Committee received testimony in support of this measure from the Healthcare Association of Hawaii, the Hawaii Health Systems Corporation, and the Hawaii Coalition of Care Home Administrators. Your Committee received testimony in opposition to the measure from the Department of Taxation and the Tax Foundation of Hawaii.

Your Committee finds that the general excise tax is assessed for the privilege of doing business in Hawaii. This includes the business of providing necessary health care. Your Committee further finds that this tax affects the elderly and disabled disproportionately because health care is a basic necessity for these individuals and the added expense of the tax is passed to them.

Your Committee has amended this measure by changing the effective date from "July 1, 2007" to "July 1, 2010," to encourage continued discussion.

As affirmed by the record of votes of the members of your Committee on Health that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2508, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2508, S.D. 1, and be referred to the Committee on Ways and Means.