STAND. COM. REP. NO. 584

Honolulu, Hawaii

, 2021

RE: H.B. No. 1314

H.D. 1

Honorable Scott K. Saiki

Speaker, House of Representatives

Thirty-First State Legislature

Regular Session of 2021

State of Hawaii

Sir:

Your Committee on Judiciary & Hawaiian Affairs, to which was referred H.B. No. 1314, 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:

(1) Authorize each county to levy a county surcharge on transient accommodations tax if the county satisfies certain real property tax requirements;

(2) Repeal the allocation of transient accommodations tax revenue to the counties and make conforming amendments;

(3) Establish a Residential Property Owner Tax Credit and a Residential Circuit Breaker Tax Credit; and

(4) Beginning with taxable years after December 31, 2021, gradually implement new individual income tax and corporation income tax brackets and rates in intervals.

Your Committee received testimony in opposition to this measure from the City and County of Honolulu, Kohala Coast Resort Association, Maui Chamber of Commerce, Hawai‘i Budget & Policy Center, and one individual. Your Committee received comments on this measure from the Department of Taxation, Department of the Attorney General, Mayor of the County of Kaua‘i, and Tax Foundation of Hawaii.

Your Committee finds that due to the rising cost of living in Hawaii, it is critical that the State find ways to lessen the financial burden for local residents. This measure proposes a new solution to shift the tax burden in favor of residents by reimagining certain basic tenets of the State's tax code. Specifically, this measure over the next twelve years aims to be relatively revenue neutral from the standpoint of the State's tax base that is generated between real property taxes, transient accommodations taxes, and individual and corporation income taxes. In roughly over a decade, the revenues from those tax bases will be restructured by:

(1) Shifting domain over transient accommodations taxes from the State to the counties;

(2) Increasing real property tax rates, but with sizeable adjustments in deductions for resident age exemptions and for residents living in a primary residence;

(3) Eliminating individual and corporation income taxes to zero by 2030; and

(4) Providing tax credits to certain residents and residential landlords.

Over time, this measure provides more financial security and stability for residents, particularly the State's most vulnerable working class households.

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. 1314, H.D. 1, and recommends that it be referred to your Committee on Finance.

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

____________________________

MARK M. NAKASHIMA, Chair