More Bills in the Home Stretch
by Tom Yamachika, President, Tax Foundation Hawaii
In last week’s column we started a list of bills that the Hawaii Legislature has passed up to the Governor for action. Here’s a list of some of the eyebrow-raising bills that have gone to the fifth floor.
Senate Bill 3040 is a bill sponsored by the Department of Accounting and General Services, which handles a lot of the purchasing for the State. It wants to build an automated procurement system that is electronic, accounting-oriented, multi-module, and data-based that integrates procurement activities from solicitation to contract management. So far, so good; such a system sounds way better than the manually intensive processes we have now. But part of the bill requires the procurement office to collect a transaction fee for the use of the procurement automation systems to cover the costs. Which seems to mean that if I am selling something to the State and I want to get paid, I need to pay the State for the privilege of getting paid. Even better, if I want to put in a bid so that the State might buy my products or services, I need to shell out a few bucks for the privilege of offering my wares, whether or not they get purchased. Excuse me, but we already tax the businesses who are selling things to the State. This bill, it seems, will raise the costs of things that the State purchases even more.
House Bill 2179, sponsored by the Department of Taxation, allows the Department to convert tax liens to civil judgments if 365 days pass from the date of recording with no response or action by the taxpayer. Why do they want to do this? Recall that back in 2009, lawmakers adopted a 15-year statute of limitations for the collection of taxes, meaning that if you owe back taxes and the Department hasn’t managed to beat the money out of you in 15 years, the Department can stop searching for your money and leave you alone. (The comparable period for federal taxes is ten years.) But if this bill becomes law, a tax lien can be converted to a civil judgment just before the 15th year expires. Civil judgments have their own life of ten years and can be extended for another ten years. Meaning that the Department can do an end run around the 15-year statute of limitations and keep going after a hapless taxpayer for up to 35 years! Unless, of course, the taxpayer takes “action” or makes a “response,” with neither term defined in the law.
House Bill 137, another 2021 bill that got dusted off this session, deals with the county liquor commission and its powers to investigate liquor licensees. There’s a State tax on liquor sales, and current law says that if a liquor commission investigator finds out that liquor tax hasn't been paid the investigator can rat out the licensee to the Department of Taxation. Under the bill, that will no longer be legal and the Department of Taxation will need to use its own investigative resources to root out liquor tax scofflaws. I wonder if that means the Department of Taxation will need to be sending investigators to the local bars and buying drinks, at taxpayer expense, “to figure out whether they’re paying their taxes.” In any event, it seems a waste to send law enforcement investigators in and prevent them from reporting any observed violations to another law enforcement agency.
And, last but not least, Senate Bill 2379 allows the Department of Taxation’s Special Enforcement Section to examine any sector of the state’s economy, initiate civil investigations, and use enforcement and education to deter taxpayer noncompliance. These are tasks entrusted to the Department generally, so why call them out specifically for this one piece of the Department? The answer is money, of course. The Special Enforcement Section can spend money in the Tax Administration Special (slush) Fund, which we have written about before. That fund, which is fed by certain tax collections and fines, became a cash cow for the Department, so much so that the Legislature raided $15 million from the fund last session. The Department, like many of the other state departments, apparently feels that it is entitled to grab some of the tax collections and use them for itself before the Legislature and the other departments get their grubby mitts on that moola. This is a trend in government behavior that we should be reversing, not fostering.
Again, June 27 is the next magic date – that’s when the Governor has to announce his “intent to veto” list.