Return of the Frankenbill!

by Tom Yamachika, President, Tax Foundation Hawaii

Most of us have heard of “Frankenstein,” a novel written in 1818 by Mary Wollstonecraft Shelley. The story’s protagonist, Dr. Victor Frankenstein, created a creature by assembling bits and pieces from cadavers and then bringing it to life using some unexplained method. (Mad scientists have to have their trade secrets!)

A “Frankenbill” or “Frankenstein bill” is one that is made by cobbling together bits and pieces of other bills, especially bills that have already died in our legislative process. By engrafting those bits and pieces into a bill that is still alive in the process, those pieces are effectively given new life.

In our Legislature, the Senate passed an omnibus tax increase bill, Senate Bill 56, which we in this column have called the “Enola Gay” bill. It contained massive increases in income tax, both individual and corporate; wholesale 2-year suspensions of exemptions in the general excise tax; and a hefty increase in the conveyance tax.

After a public uproar over the Enola Gay bill, leaders in the House of Representatives moved swiftly to stomp on the bill. The House Speaker’s office gave the bill a quadruple referral, meaning it had to clear four different House committees in a relatively short time if it were to survive. That made the bill as good as dead, according to House Majority Leader Belatti. As of the Second Lateral deadline of March 25, none of the four House committees to which the bill was assigned had bothered to hear it. That bill is now officially dead.

But, in a hearing notice released on March 25, the Senate Ways and Means Committee declared its intention to stuff some of the major pieces of Senate Bill 56 into House Bill 58, a bill that at the time of crossing over to the Senate only provided for the temporary reallocation of conveyance tax revenues to pay debt service that the State owes on its general obligation bonds. The Proposed Senate Draft 1 of this bill contains new parts temporarily repealing the general excise tax exemptions and juicing up the conveyance tax for properties over $4 million.

Another proposed new part would reduce the Hawaii estate tax threshold. The estate tax threshold is the size of a decedent’s estate below which no estate tax is owed. Once the threshold is passed, the estate tax ramps up very quickly. In 2020, the Hawaii estate tax threshold is $5.49 million while the federal estate tax threshold is $11.58 million. The bill would reduce the Hawaii threshold to $3.5 million.

According to the website of the good government organization Common Cause Hawaii:

[O]ur Legislature is not supposed to pass a bill which addresses 2 or more unrelated subjects, and is not supposed to pass a bill whose subject has not had 3 separate readings in the State House and 3 separate readings in the State Senate. The purpose is to ensure a fair process, where the public and legislators have time to review and comment on proposed legislation.

Unfortunately, legislators use deceptive practices such as “gut and replace”, when a bill is stripped of its original content and replaced with an unrelated bill’s contents, and “Frankenstein bills” which is when bills encompassing various subjects are cobbled together into one bill.

This new Frankenbill is scheduled to receive a hearing in the Ways and Means Committee on March 31st. The hearing would have been held just before the publication date of this column. What did our lawmakers do? Did they create the Frankenbill, perhaps to be used as a bargaining chip in the waning days of this legislative session? Did they stuff this bill or other bills with the stratospheric income tax increases that have brought us national and international attention, and not the good kind?

Be informed!