STAND. COM. REP. NO. 622

Honolulu, Hawaii

RE:    S.B. No. 1285

       S.D. 1

Honorable Colleen Hanabusa

President of the Senate

Twenty-Fourth State Legislature

Regular Session of 2007

State of Hawaii

Madam:

     Your Committee on Economic Development and Taxation, to which was referred S.B. No. 1285 entitled:

"A BILL FOR AN ACT RELATING TO TAX,"

begs leave to report as follows:

     The purpose of this measure is to exempt the sale of liquid fuels and alcohol fuels from the general excise tax (GET), and to increase the fuel tax 1 cent per gallon.

     The Department of Taxation, Department of Transportation, and the Tax Foundation of Hawaii submitted comments.

     Your Committee received a revenue impact statement from the Department of Taxation (Department) that an increase in the state fuel tax will increase revenue for the State Highway Fund by $9,200,000 annually.  The GET exemption for alcohol fuels will reduce the general fund revenue by $100,000 annually.

     In its methodology the Department stated that the GET exemption for alcohol fuel expired on December 31, 2006, but the Council on Revenues did not put the tax increase into the baseline projections for the general fund.  The increase in fuel tax will increase revenues for the State Highway Fund by the following amounts, based on calendar year 2006 collections: gasoline, $4,730,000; diesel oil (non-highway), $1,320,000; aviation fuel, $2,120,000; diesel oil (highway), $1,000,000; all other, $30,000, for a total of $9,200,000.

     It is the intent of your Committee to continue the legislative discussion on this measure.

     Your Committee has amended this measure accordingly, by inserting an effective date of July 1, 2045, and making technical, nonsubstantive amendments.

     As affirmed by the record of votes of the members of your Committee on Economic Development and Taxation that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1285, as amended herein, and recommends that it be referred to the Committee on Ways and Means, in the form attached hereto as S.B. No. 1285, S.D. 1.

Respectfully submitted on behalf of the members of the Committee on Economic Development and Taxation,

____________________________

CAROL FUKUNAGA, Chair