HB2414 SD1

SECTION 1. The legislature finds that the cost of living in Hawaii is extremely high and too many residents are struggling to pay for housing, food, and medication. According to data from the Missouri Economic Research and Information Center, Hawaii had the highest cost of living in 2019.

The legislature further finds that the general excise tax is levied on nearly every economic activity, which, due to the highly regressive structure of the tax, disproportionately affects low-income and middle-class families. The regressive nature of Hawaii's general excise tax makes it difficult for some families to afford basic life necessities, such as food, medicine, and diapers. Coupled with the high cost of living, the coronavirus disease 2019 (COVID-19) pandemic has further exacerbated the problem of local families and individuals being unable to afford these necessities.

Diapers are a large expense for Hawaii families with small children and are essential to the health of babies and toddlers as they each require about fifty diaper changes per week, or roughly two hundred diaper changes per month. However, according to the National Diaper Bank Network, one in three families struggle to afford clean diapers for their children.

Hawaii children who come from low-income families are at-risk regarding their diaper needs. According to the National Diaper Bank Facts on Hawaii, eleven per cent of Hawaii families are recipients of supplemental nutrition assistance program benefits with children under the age of five; twenty-three per cent of Hawaii families are women, infants, and children program benefit recipients with infant children; and thirty-three per cent of Hawaii families receive temporary assistance for needy families benefits with at least one child under the age of three. The maximum amount a family of one parent and two children can receive in Temporary Assistance for Needy Families benefits is $610. It is estimated that thirteen per cent of this maximum benefit goes toward diaper needs. Additionally, thirty-one per cent of Hawaii families have births covered by Medicaid. Data show that there is a significant number of families who are at risk of not having enough financial resources to provide necessities, including food, medicine, and diapers, for their children.

Many child care facilities require parents to provide diapers for their children. Families that do not have access to clean diapers cannot access child care and often miss work, which reduces their monthly income. Hawaii currently has two National Diaper Bank Network member diaper banks that provide diapers to families; however, these banks do not meet the needs of all families who struggle to provide clean diapers for their children. According to the National Diaper Bank, an average monthly supply of diapers costs approximately $80. According to the American Academy of Pediatrics (AAP), families may spend close to $1,000 on disposable diapers during the first year of a child's life, which does not include the costs of diaper wipes, diaper creams, and other diapering items.

Dirty diapers also put healthy children at risk of various diseases due to parasites, bacteria, and viruses linked to dirty diapers. Dirty diapers can cause diaper rash or diaper dermatitis, including Candida, a type of yeast infection, and Seborrhea, a type of infectious skin condition caused when skin is exposed to moisture, friction, urine, stool, or other skin irritants. Other germs found in dirty diapers are salmonella, listeria, and norovirus, which can cause a healthy child to quickly fall ill. According to AAP, hepatitis A is the most common viral infection found in dirty diapers, which can lead to other hepatitis-related infections. AAP also found that certain diaper dermatitis can lead to bladder infections that can cause urinary tract infections, which more commonly affect girls.

The legislature notes that the COVID-19 pandemic has led to over two hundred fifty thousand workers in Hawaii losing their jobs, leaving all those families to suffer financially. The legislature further notes that thirty-two states, plus the District of Columbia, currently exempt most foods purchased for consumption at home from the state sales tax. The legislature also finds that there are several other states that exempt diapers from sales or excise taxes, while Hawaii does not.

The legislature believes that Hawaii should follow the lead of these states by exempting certain necessities from the general excise tax. Exempting certain food, nonprescription drugs, and diapers from the general excise tax will help many families that have been impacted negatively by the COVID-19 pandemic and allow them to maintain the health of their families. In addition, workers and their families who may save money on these purchases will be able to spend that money elsewhere in the economy, thus allowing the money to continue to circulate, which will help many businesses and continue to generate revenue for the State.

Accordingly, the purpose of this Act is to help alleviate the general excise tax burden on local families and individuals by establishing general excise tax exemptions for the gross proceeds or income derived from the:

(1) Sale of food and food ingredients in the State;

(2) Sale of nonprescription drugs in the State; and

(3) Manufacture, production, packaging, and sale of diapers in the State.

SECTION 2. Chapter 237, Hawaii Revised Statutes, is amended by adding three new sections to be appropriately designated and to read as follows:

"§237- Exemption for sales of food. There shall be exempted from, and excluded from the measure of, the taxes imposed by this chapter all of the gross proceeds or income arising from the sale of Supplemental Nutrition Assistance Program-eligible items; provided that soft drinks shall not be exempted by this section.

§237- Exemption for nonprescription drugs. (a) There shall be exempted from, and excluded from the measure of, the taxes imposed by this chapter all of the gross proceeds or income received from the sale of nonprescription drugs.

(b) For the purposes of this section:

"Drug" means:

(1) Articles recognized in the official United States Pharmacopoeia, official United States Pharmacopoeia Dispensing Information, official Homeopathic Pharmacopoeia of the United States, or official National Formulary, or any supplement to any of these publications;

(2) Articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in humans or animals;

(3) Articles, other than food or clothing, intended to affect the structure or any function of the body of humans or animals; or

(4) Articles intended for use as a component of any article specified in paragraph (1), (2), or (3); provided that the term "drug" does not include devices or their components, parts or accessories, cosmetics, or liquor as defined in section 281-1.

"Nonprescription drug" means any packaged, bottled, or nonbulk chemical, drug, or medicine that may be lawfully sold without a practitioner's order; provided that "nonprescription drug" does not include cannabis or manufactured cannabis products authorized pursuant to chapters 329 and 329D.

§237- Exemption for diapers. (a) There shall be exempted from, and excluded from the measure of, the taxes imposed by this chapter all the gross proceeds or income arising from the manufacture, production, packaging, and sale of diapers within the State.

(b) For the purposes of this section, "diaper" means an absorbent garment that:

(1) Is washable or disposable that may be worn by an infant or toddler who is not toilet-trained; and

(2) If disposable:

(A) Does not use any latex or common allergens; and

(B) Meets or exceeds the quality standards for diapers commercially available through retail sale in the following categories:

(i) Absorbency (with acceptable rates for first and second wetting);

(ii) Waterproof outer cover;

(iii) Flexible leg openings; and

(iv) Refastening closures."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act shall take effect on July 1, 2050.

HOUSE OF REPRESENTATIVES	H.B. NO.	2414
THIRTY-FIRST LEGISLATURE, 2022		H.D. 1
STATE OF HAWAII		S.D. 1