Say It’s a Tax!

by Tom Yamachika, President, Tax Foundation Hawaii

The news recently mentioned a lawsuit that the City and County of Honolulu, now joined by the other three counties, has leveled against our state government regarding the HSTA-sponsored constitutional amendment.  The counties, obviously not overjoyed at the prospect of the State slapping a surcharge on their primary source of revenue, want the courts to void the ballot question. They list several reasons, including that the ballot question is misleading; that “investment property,” the subject of the new tax/surcharge, is hopelessly vague; and that Senate Bill 2922, which contains the amendment, was improperly adopted. 

We at the Foundation decided we couldn’t sit still while all of this was going on.  We sought to jump into the action with a “friend of the court” filing. Rather than dispersing our energies among all the arguments that the counties are making, we decided to weigh in on one issue only. 

The issue is this.  The ballot question that the voters will see is, “Shall the legislature be authorized to establish, as provided by law, a surcharge on investment real property to be used to support public education?”  This “surcharge” is going on top of the real property tax.  Yet the ballot question doesn’t say anything at all about tax.  Does that make the ballot question misleading or deceptive?  

We think it does. 

To make it clear, the Foundation is not taking a position on whether the public should vote “Yes” or “No.”  But we think the public should know that they are voting on a tax. 

As support, we found an Arkansas case from 1936.  That case, Walton v. McDonald, 192 Ark. 1155, 97 S.W.2d 81 (1936), involved a proposed law, which their ballot described as, “An Act to provide for the assistance of aged and/or blind persons and funds therefor, the administration and distribution of same, penalties for the violation of Act, and for other purposes.”  But it proposed a permanent 2% general sales tax to provide that assistance.  As here, there was no mention of “tax,” and the court was bothered enough to void the act even though the voters passed it.

Whatever you may think of Arkansas or Bill Clinton country, the Arkansas Supreme Court has a point.  We need people to know what they are voting on.  The court said:

The proposed ballot title fails to disclose the vital portion of this act, which is, not whether some provision shall be made for the aged and the blind, but how that provision is to be made. We do not hold that it is essential that the ballot title should have disclosed what the provisions for the aged and blind should be, or the amount thereof. But we do hold that the manner of making this provision is of the essence of the act. It is an essential fact which should be disclosed to the elector, and could have been done by the addition of only a few more words and without recitation of details. Every one knows the general operation of a sales tax. The undisclosed fact is that such a law will be put in operation. The ballot title does not, therefore, meet the test that it shall be free from any misleading tendency, whether of amplification or of omission, and we, therefore, hold it insufficient.

In other words, mentioning “tax” is necessary for voters to understand what is going to happen if they vote “Yes.”

Stay turned for further updates as this case makes its way through the court system.