Grassroot Institute Files Amicus Motion in Rail Appeal

Watchdog group says state has broken public's trust in government by skimming from surcharge

News Release from Grassroot Institute

HONOLULU, HAWAII -- (Oct. 27, 2016) --  On October 18, the Grassroot Institute of Hawaii filed a motion to allow it to file an amicus curiae brief in support of the Tax Foundation of Hawaii’s lawsuit against the state of Hawaii. The Tax Foundation brought the suit to challenge the Hawaii Department of Taxation's practice of keeping a full 10% of the rail surcharge for the costs of administering the tax, despite the fact that the law directs DOTAX to calculate how much is required for its management of the surcharge and return the remainder to the rail project.

"The state has acted with a deplorable lack of transparency in its administration of the rail surcharge," stated Keli'i Akina, Ph.D., President of the Grassroot Institute. "This is even more problematic when one considers that taxpayers have been told it might be necessary to extend or increase the surcharge in order to complete the rail project."

Nowhere is it suggested that the Department of Taxation requires the full 10% fee in order to fulfill its duties. In fact, the Tax Foundation has demonstrated that the amount kept by DOTAX every year to administer the surcharge equals or exceeds the entire annual DOTAX budget.

A lower court ruled against the Tax Foundation, ruling that the court lacked jurisdiction because this was a controversy related to taxes. However, the case is now before the Hawaii Intermediate Court of Appeals. The Grassroot Institute argues that this is not about the right to collect taxes, but rather a matter of misallocation of the funds. Moreover, because the state has made it clear that it lacks the political interest or ability to address the issue, citizens are the only ones left to hold the state accountable.

Michael A. Lilly, a former Hawai`i Attorney General who filed the motion, said that "Grassroot’s amicus brief will present arguments not advanced by other parties to the suit. The issue on appeal the Tax Foundation, as a taxpayer, has a right to challenge the State taking the entire 10% of the GET surcharge.  It should because, for political or other reasons, no government entity is willing to challenge the State’s conduct.  Although the state is supposed to only take an amount equal its cost of collection, for several years it exceeded the entire budget of the state’s Department of Taxation."

"In essence, the Department of Taxation has been skimming funds from the rail surcharge for years," stated Dr. Akina. "With the problems that already beset rail, to learn that there are untold millions of dollars that have been siphoned off by DOTAX is a gross violation of the public trust. Every dollar that was taken from the wallets of the taxpayers to pay for rail should be going to that project."

Dr. Akina continued: "To make matters worse, DOTAX claims that they can't account for what they spent because they never tracked the cost of administering the surcharge. This suggests not just a lack of transparency but also mismanagement or even political chicanery. We hope that the legislature takes the necessary lesson from this fiasco and orders full audits for both the rail project and the Department of Taxation."

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