SB11 HD1

THE SENATE	S.B. NO.	11
TWENTY-FOURTH LEGISLATURE, 2007		S.D. 3
STATE OF HAWAII		H.D. 1

A BILL FOR AN ACT

RELATING TO EXCISE TAX ON HEALTH CARE.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that all residents of this state should have access to affordable, quality health care. Hawaii has prided itself on its near-universal health coverage under the Hawaii Prepaid Health Care Act, but the uninsured population is growing. It has been reported that in 2002, more than twenty-seven thousand uninsured patients were treated in community health care centers. This figure is up sixty-seven per cent from 1997 and twenty per cent from 2001. Sixteen per cent of uninsured patients admit to never paying their bills after visiting community health centers, clinics, hospitals, and emergency rooms. The unpaid bills put more stress on an already overburdened health care system.

Act 247, Session Laws of Hawaii 2005, enacted the county surcharge on state tax at a rate of up to one-half per cent of gross proceeds or gross income (for excise tax) and value of property and services (for use tax) to finance mass transit. The surcharge applies to health care services. The legislature further finds that increasing the cost of health care is likely to increase the cost of living and push more residents into poverty, which increases their likelihood of becoming uninsured. The results are an increase in medicaid expenditures for the State.

The legislature further finds that neighbor island residents are particularly adversely affected by the excise tax surcharge on medical services. They often have no choice but to pay more to travel to Oahu to find medical specialists, often accompanied by a family member. They pay more for health care by reason of the costs of their air and ground transportation, lodging, and meals, all of which are taxable. Honolulu's excise tax surcharge does not benefit neighbor island residents, which poses an inherent inequity.

The purpose of this Act is to exempt physician services, hospital charges, and rehabilitation services from the county surcharge on excise tax.

SECTION 2. Section 237-8.6, Hawaii Revised Statutes, is amended by amending subsection (d) to read as follows:

"(d) No county surcharge on state tax shall be established on any:

(1) Gross income or gross proceeds taxable under this chapter at the one-half per cent tax rate;

(2) Gross income or gross proceeds taxable under this chapter at the 0.15 per cent tax rate; [or]

(3) Gross income or gross proceeds from medical services provided by, or at the direction of a physician licensed under chapter 453, an osteopath licensed under chapter 460, a dentist licensed under chapter 448, or services provided at a licensed hospital, medical clinic, nursing home or facility, or rehabilitation facility; or

[~~(3)~~] (4) Transactions, amounts, persons, gross income, or

gross proceeds exempt from tax under this chapter."

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 4. This Act shall take effect on July 1, 2007; provided that section 2 of this Act shall be repealed on June 30, 2009, and section 237-8.6, Hawaii Revised Statutes, shall be reenacted in the form in which it read on the day before the effective date of this Act.