How to tell which bills to veto

by Keli’i Akina, PhD, Grassroot Institute, April 24, 2021

As we near the end of the legislative session, the spotlight is moving toward Gov. David Ige. 

After a tumultuous few months, the governor will have the last word on several bills that could have a lasting impact on Hawaii. Some, I hope, he will be happy to sign. But there are others that we would better off not hearing from again.

Among those in the latter category are all the tax bills, especially a few in particular.

We know, of course, that the Legislature considered numerous tax increases this year, despite voluminous testimony that such hikes likely could cripple Hawaii’s efforts to recover economically from the heavy damage caused by the coronavirus lockdowns.

Some of the worst proposals fell by the wayside— like the omnibus tax proposal, SB56, which would have given Hawaii the highest personal income tax hike rate in the nation. 

But HB58, a notorious “frankenbill” that would increase conveyance taxes on residential properties valued at over $4 million and eliminate certain excise tax exemptions, just made it through conference committee. If the final version of the bill is approved by the House and Senate, it then will go to Gov. Ige.

HB58 supporters suggest that a conveyance tax hike on high-value properties won’t hurt the average citizen. Ultimately every tax hurts the average citizen, but more important is that an increase like the one proposed in HB58, if enacted, will only incentivize property owners to form corporations to buy property in order to avoid paying the conveyance tax. In the end, there will be a lot of corporations owning property, but no increase in tax revenues. Our legislators then will go out in search of new targets for their tax hikes because “soaking the rich” didn’t work out as planned.

In a similar vein, HB133 would raise the capital gains tax threshold to 9% and the alternative capital gains tax for corporations to 5%. The bill hasn’t yet passed out of conference committee, but it poses a major threat to Hawaii rebounding from the COVID-19 recession, because few things discourage investment and entrepreneurship as effectively as an increase in the capital gains tax. The unintended effect of this bill will be to persuade entrepreneurs and business owners to invest their time and money in other states.

The governor knows it would be bad policy to raise taxes is our fragile economy. He even stated in January that “tax increases are not necessary at this time,” after the promise of a federal bailout and the prospect of better-than-expected revenue projections relieved many of the state’s pressing budget woes. He added: “The last thing we want to do is raise taxes during an economic downturn.” 

I hope he will remember those words when these bills and other proposed tax hikes cross his desk.

On the upside, HB103 would reform the executive’s emergency powers. The final draft of the bill states that the powers granted in an emergency cannot be inconsistent with the Hawaii Constitution; sets parameters for the suspension of laws and requires justification for a suspension; and allows the Legislature to end an executive's emergency powers by concurrent resolution. 

Though not perfect, if enacted this bill would go a long way toward restoring the balance of powers that has been upset through the use of endless emergency declarations by the governor.

While Ige might hesitate to sign a bill that limits his executive power, he should realize that it is to his benefit to restore the balance of powers, to share accountability and ensure greater protections for civil rights in an emergency.

The bill stands to fix a problem in the state’s emergency management statute that wasn’t obvious before the pandemic. Signing it would be the right thing to do.

Finally, there’s one bill that should be an easy decision for the governor. SB348 repeals a state regulation that prevents local beverage companies from producing noncarbonated water in aluminum cans. It’s an outdated regulation that hurts local business and deprives consumers of more options.

In short, it’s exactly the kind of reform that Hawaii’s economy needs right now, and it’s too bad we didn’t see more bills like this during this most recent legislative session.

Over the next week, a lot of bills will land on the governor’s desk. But there’s a simple rule he can follow to decide which ones to sign and which ones to veto: Just say “no” to tax increases, and say “yes” to bills that protect civil liberties or reduce the regulatory burden on local businesses.

E hana kākou! (Let's work together!)

Keli'i Akina, Ph.D.
President / CEO