STAND. COM. REP. NO. 384-22

Honolulu, Hawaii

, 2022

RE: H.B. No. 1209

H.D. 2

Honorable Scott K. Saiki

Speaker, House of Representatives

Thirty-First State Legislature

Regular Session of 2022

State of Hawaii

Sir:

Your Committee on Judiciary & Hawaiian Affairs, to which was referred H.B. No. 1209, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

The purpose of this measure is to require the Department of Taxation, by January 1, 2026, to suspend and refund certain income tax amounts received or withheld upon the passage and ratification of a constitutional amendment authorizing the State to have real property taxing authority and the enactment of a state law specifying real property tax amounts.

Your Committee received testimony in opposition to this measure from Hawaii Children's Action Network Speaks!, League of Women Voters of Hawaii, Hawai‘i Appleseed Center for Law and Economic Justice, Maui Chamber of Commerce, and eleven individuals. Your Committee received comments on this measure from the Department of Taxation and Tax Foundation of Hawaii.

Your Committee finds that Hawaii has the second highest income tax rates and the lowest real property tax rates in the nation. This tax structure results in the overall tax burden being placed on the residential workforce, while effectively subsidizing non-residents' real estate investments in Hawaii. This measure will suspend and refund by January 1, 2026, personal and corporate income tax amounts received or withheld by the Department of Taxation upon the ratification of a constitutional amendment authorizing the State to tax real property and the enactment of state law specifying real property tax amounts to be levied and assessed.

Your Committee further finds that the intention of this measure is to eliminate personal and busines income taxes and offset these tax revenue sources with real property taxes. Your Committee believes it is the intention of the Legislature to eventually double the homeowner and senior exemptions on real property taxes to lessen the overall tax burden on local residents. This measure is contingent upon the enactment of House Bill No. 1208, House Draft 2, Regular Session of 2022, and the ratification of an amendment to the Hawaii State Constitution that repeals the counties' exclusive authority for real property taxation.

Your Committee has amended this measure by:

(1) Clarifying the intention of the measure; and

(2) Making technical, nonsubstantive amendments for the purposes of clarity, consistency, and style.

As affirmed by the record of votes of the members of your Committee on Judiciary & Hawaiian Affairs that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1209, H.D. 1, as amended herein, and recommends that it be referred to your Committee on Finance in the form attached hereto as H.B. No. 1209, H.D. 2.

Respectfully submitted on behalf of the members of the Committee on Judiciary & Hawaiian Affairs,

____________________________

MARK M. NAKASHIMA, Chair