Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-First State Legislature

Third Special Session of 2001

State of Hawaii

Sir:

Your Committee on Finance, to which was referred H.B. No. 6 entitled:

begs leave to report as follows:

The purpose of this bill is to provide a tax savings to transportation service providers by allowing them to pay the general excise tax in lieu of the public service company tax. This would allow them to pay a four percent tax based on their actual income for the current period.

Testimony in support of this measure was received from the Visitor Industry Coalition, The Hawaii Business Roundtable, the Chamber of Commerce of Hawaii, the Hawaii Transportation Association, and the Department of Taxation. The Department of Transportation supported the intent of this bill. The Tax Foundation of Hawaii submitted comments.

The events of September 11, 2001, have had a tremendous influence on both the national and state economies, unexpectedly affecting the livelihood of millions of citizens. Tourism, Hawaii's principal industry, accounts for nearly $10.9 billion in general revenues each year and was severely impacted by these attacks. The number of travelers to the State has decreased by between twenty and fifty percent, which has not only affected the tourism industry but the economy of the entire State.

Dealing with this economic crisis is one reason the Governor has convened a special session. Your Committee feels that in order to avoid an economic catastrophe, the tourism industry needs to be revitalized through measures which aid this vital segment of our economy.

Under current law, transportation service providers are subjected to the public service company tax which is generally measured at the rate of four percent on the gross income from the provider's business earned in the previous taxable year. This tax is preferred under more favorable economic conditions. However, your Committee realizes that under declining economic conditions, a transportation service provider may pay more in taxes than its current gross income can support.

Given the current and anticipated economic climate, your Committee finds that passage of this measure will result in a tax savings to the transportation service providers and, in turn, stimulate the economy.

As affirmed by the record of votes of the members of your Committee on Finance that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 6 and recommends that it pass Second Reading and be placed on the calendar for Third Reading.