‘Blankety-blank’ bills at Legislature leave Hawaii taxpayers in the dark

from Grassroot Institute of Hawaii

How much would a proposed new tax increase cost Hawaii taxpayers?

“Blankety-blank,” said Tom Yamachika, president of the Tax Foundation of Hawaii, on the latest “Talking Tax” program on ThinkTech Hawaii.

Joined by co-host Mark Coleman, Grassroot Institute of Hawaii managing editor, Yamachika was referring to the state Legislature’s growing practice of advancing bills with blank amounts for proposed tax increases, making it nearly impossible for the public to provide meaningful input. 

Yamachika said HB2686, for example, proposed a “blank percent” surcharge for properties valued between $1 million and $2 million, then “blank percent” for properties valued between $2 million and $4 million, and so on.

“We don’t know what the heck is in their mind … How do you even talk about this stuff? … At some point, you don’t know whether you’re talking about a tax increase or a tax decrease,” he said.

This practice, which Yamachika calls “blankety-blanking,” has grown in recent years, with some bills containing 50 to 100 blanks where key details should be. 

The lack of specificity raises questions about the constitutionality of the process, as the Hawaii Constitution requires bills to have three readings in each chamber to allow for public comment. 

“How can the public weigh in on a bill with a blank or lots of blanks?” Yamachika asked.

To address the problem, Yamachika suggested that legal action might be necessary.

“Maybe somebody’s got to come up and step up and file suit and get this before the courts to end the pernicious practice,” he said.

Yamachika and Coleman’s conversation also touched on the state’s constitutional spending limit and the need for income tax bracket adjustments to account for inflation.

TRANSCRIPT

4-10-24 Talking Tax with Tom Yamachika and Mark Coleman

Mark Coleman: Good morning, everybody. Once again, here at “Talking Tax” in beautiful downtown Honolulu — in beautiful Hawaii anyway. 

I’m Mark Coleman, and I’m the co-host of “Talking Tax,” this week’s “Talking Tax” episode here, on ThinkTech Hawaii, with Tom Yamachika, president of the Tax Foundation of Hawaii.

I’m with the Grassroot Institute of Hawaii, and we both here today are gonna talk about the “fear of the unknown” in the tax world — actually over at the Legislature, where they fool around with taxes endlessly, year after year. 

And the problem this year, as Tom writes about in his weekly column, as he wrote about in his weekly column recently, is that they have apparently — I’m not sure how old this practice is —  but they’re starting to produce bills [that have] already gone through a first or second reading with blanks instead of numbers where there once were numbers related to tax increases. 

So they’re proposing bills that now are suggesting they’re going to raise our taxes, but they’re not, like, saying, like, by how much. So how do you comment on a bill like that? 

Tom, what brought this to your attention? What prompted you to write about this?

Tom Yamachika: Well, it’s something I actually have been writing about for many years now.

Coleman: Oh, so it’s a long-going practice?

Yamachika: Yeah, at least for the past five or six years. It kind of started with small things, leaving blanks and appropriations so the amounts could be filled in later. But now it’s kind of getting into tax bills in a way that really makes the tax bill almost unintelligible.

Let’s talk about some concrete examples. 

There’s a bill that’s advanced pretty far, it’s probably gonna pass, called “Relating to the Stabilization of Property Insurance.” And what that bill does is it is attempting to increase the transient accommodations tax; increase the conveyance tax;, increase the insurance premiums tax, at least in the current version; and reinstate a mortgage recording fee, but we don’t know by how much because most of the amounts are left blank.

To give you an example, for the conveyance tax, they are proposing, in House Bill 2686, a surcharge for sale of properties. And the bill text goes something like this: Blank percent for properties having a value of less than $600,000 and less than $1 million; blank percent for properties at least $1 million but less than $2 million; blank percent for properties having a value of at least $2 but less than $4 million”; and the list goes on.

Coleman: Yeah, yeah.

Yamachika: So, we don’t know what the heck is in their mind.

Coleman: Right, right.

Yamachika: And it’s kind of becoming a real problem because the more blanks they insert in these bills, the more unintelligible it becomes. You know, at some point, you don’t know whether you’re talking about a tax increase or a tax decrease.

Coleman: That’s true, that’s true. Yeah, it makes it hard to go in and say, “I support this bill or I don’t.” 

To the extent that it might be just a new tax period and we’re just waiting to find out how much of an increase it’s going to be, that’s problematic. 

But if there’s a possibility that it could actually be a decrease of an existing tax, I don’t know if that’s at play really right now. But well, then you’d want to support that, no matter what the number is there, at least that we would at the Grassroot.

Yamachika: Yeah. Let me give you another example. This is the current version of the Green Affordability Plan. So what I mean by that is the governor’s come in and says, you know, we need to support our ALICE families — Alice being” asset limited, income constrained and employed.” So basically, lower to lower-middle class.

And, you know, they came in, to their credit, with a bill that had numbers in it. House Draft 1 which came out of House Finance, is “the tax shall be blank plus blank percent of the excess of income over $5,280; blank plus blank percent of the excess over $10,560; blank plus blank percent of the excess over $21,120. So each and every one of the tax brackets is replaced with a blank.

So there’s blanks for married filing jointly, blanks for head of household, blanks for single. How do you even talk about this stuff?

Coleman: Well how do they? I mean, you’re over there a lot in the big square building. What is your take on why they’re doing this so often?

Yamachika: Well, number one, they know that the bill cannot be enacted in this form. OK? But … 

Coleman: So it could be a good thing? Is it a subterfuge to try to sabotage the bill?

Yamachika: I think it’s a subterfuge to prevent public comment because …

Coleman: Well, yeah.

Yamachika: … because what I think practically happens is, you know, they wait till the last minute to find out how much revenue impact can go into this bill, and then they fill in the numbers in conference committee, at which point, no public comment is allowed.

 Coleman: You pointed out in your article that this would, if that’s true, that that would violate the requirement that a bill has three public hearings. But how can a public hearing where there’s no money figures involved count as a public hearing, right?

Yamachika: Yeah, that’s, I think, the question that has to be asked. I mean, one, we have a constitutional requirement that a bill be read throughout three times in each house. And that is, at least in theory, to allow for debate on the bill’s contents and for the public to weigh in. Well, how can the public weigh in on a bill with a blank or lots of blanks? 

Coleman: Right

Yamachika: Fifty to 100 blanks. At some point, it’s going to be like what we call the short form bills — you know, short form bills are our bills that say you know the purpose of the bill is X, the Hawaii Revised text are amended to conform to X purpose. And that’s a valid bill.

OK? But in practice, what happens with a short form bill is, it gets heard and recommitted to the committee that brings it up for the purpose of inserting substantive provisions, and then the committee hears it again with the substantive provisions inside so they can have public comment. 

And that’s what they’re supposed to do, I think. And I think that’s what they should be doing with bills that they want to put blanks in. I mean, it’s really gotten out of hand in recent years. You know, they put blanks everywhere.

Coleman: About the green fee think, … excuse me, is there a green fee bill in there? Is that what you were talking about? 

Yamachika: I’m talking about the Green Affordability Plan, which is basically changing the income tax rates, and brackets, but we don’t know what the rates in the brackets are, because they’re all blank.

Coleman: Yeah, so there’s that, and then there’s the insurance stabilization, and then apparently there’s also, they’re also doing this with HB 2364, which is the conveyance tax hike, proposing new tiers for conveyance taxes and an entirely new classification for multifamily residential, all of which was blanked out in a later version after initially having fairly substantial tax hikes proposed, which just, again, seems fundamentally unfair.

This makes me think of the practice where they pass a bill that maybe they’re not too happy about or maybe they want to think about a little bit more. But they just want to pass it for whatever darn reason. 

And instead of saying, you know, shall be effective, you know, December 31, whatever, the year of the current year, or even July 1, they’ll put 2035 or even 3000. There’s even bills going through the Legislature right now that won’t be effective until the year 3000, which is really strange.

What kind of tactics are these that are going on over there? Is this some kind of a way to adapt to the rulings against “gut and replace”?

Yamachika: No, no, that practice has been around for a long time too. I mean, it’s basically a way — and we call that a defective effective date — it’s a way to make sure the bill goes to conference.

Coleman: Oh uh-huh.

Yamachika: OK? So look if you’re the House, you pass the bill with a defective effective date, but because you’re not entirely 100% sure that you want to pass it in that form. But but you want to see what the senate does and then talk to them about it. So you pass it with a defective effective date.

The Senate does their thing. And you have the chance, because they’ve changed it, to ticket up with them in conference. Because as we all know, if you pass a clean bill, you send it over to the Senate, the Senate thinks it’s OK and the Senate doesn’t amend it, it goes straight up to the to the fifth floor to the governor’s office so the House doesn’t see it again. And so that I think is what they wanted to prevent you know they wanted to you know take one last crack at the bill before it goes up to the fifth floor.

Coleman: Oh, I see.

Yamachika: Uh-huh. Oh. OK. I mean, that is maybe a little bit problematic, but at least, you know, with a defective effective date, you can have a reasonably intelligent discussion about, you know, what else is in the bill. But with with with blanks in the key areas, even that is tough.

Coleman: Yeah, I checked in with our policy director, Malia Hill, before we talked here today, before we joined to talk about this. And she was suggesting that “these blanks let the Legislature take advantage of the fact that you’re not supposed to make any substantial changes to a bill during conference committee hearings because arguably they’re just compromising on the amounts.

“But if the bill went through both one or both houses with a bunch of blanks, are they really just negotiating or are they effectively writing the bill?”

Yamachika: Yeah, no, I mean, at least with the with the related property insurance bill, the indication that I got from watching the testimony was that they’re really not sure how much of a problem they’re going to need.

Coleman: Right.

Yamachika: And the insurance commissioner really hasn’t, you know, tossed out a number. Industry really hasn’t tossed out a number. And so, you know, nobody really knows what the final, you know, the final damage is going to be. And in that case, you know, why are they moving the bill?

Coleman: So they’re waiting to find out, for example, if they’re going to get money from one of the relief funds like the rainy day fund. Is that one of the problems you were talking about?

Yamachika: Well I don’t think so. What they are trying to do in that bill is to basically create a Hawaii Hurricane Relief Fund. So insurers can tap into it if they’re covering a disaster, and they’re gonna otherwise lose a whole bunch of money as a result.

Coleman: Well, one thing we said about that particular bill in our testimony was that — I think it involves a surcharge on the transient accommodation tax. Is that what it was?

Yamachika: Oh, that, yeah, it involves that among other things.

Coleman: Yeah, and that alone …

Yamachika: And that’s blank too.

Coleman: Pardon me?

Yamachika: And that’s blank too.

Coleman: Oh, yeah, [laughter] that’s blank too. But also, you know, according to the law, there has to be a nexus between the tax and the use of the money, right? So is that would you consider that a fair nexus to be taxing tourism to fund an insurance stabilization program?

Yamachika: I don’t think there has to be a nexus. I mean, people make that argument, but it really doesn’t have to be there. I mean, you can impose a tax for the general operations of government and shuttle the money to the general fund. And that’s what we do all the time.

Coleman: But also wouldn’t that be considered somewhat of a special fund, if you were to tax a particular program and instead of sending it to the general fund, you’re sending it to an insurance stabilization program? That’s what they’re saying, right?

Yamachika: Yeah. I think when you are creating special funds, there are requirements in the financial statutes that we have about what constitutes a special fund or when a special fund is allowed. There you do have to have basically an argument that the fund’s going to be self-sustaining and that the outflows of the fund are going to be somehow related to what you’re taking in.

Coleman: And from where you’re taking it in?

Yamachika: Yes, yes.

Coleman: Well, OK, well, that aside, we still have this issue of running bills through the legislature without money amounts. What do you think should happen in this case? What do you think the future of all this should be?

Yamachika: Well, I mean, it took, I think, a courageous couple of organizations to step up, file suit and end the practice of gut and replace.

Coleman: Yes.

Yamachika: So I, you know, congratulations go to League of Women Voters and Common Cause Hawaii for that. 

And maybe somebody’s got to come up and step up and file suit and get this before the courts to end the pernicious practice of blankety blanking.

Coleman: Yeah, that sounds like where it has to go unless the Legislature, I suppose, could be persuaded, I suppose, to do its own housecleaning. What do you think the chances of that would be?

Yamachika: Well, you know, they come up with these interesting habits over the years, and some of them are good, some of them are not so good. 

Like this year, they apparently got into the habit of inserting into almost every bill with money implications a clause that exceeds the constitutional spending ceiling.

Coleman: Right, I noticed that.

Yamachika: And and and my point about that is, why do you need that? You only need that in one bill every year. And that’s what they used to provide.

Coleman: What bill would that be? The budget bill, right?

Yamachika: It could be the budget bill, could be something separate.

Coleman: I see. Well, are all these people saying, I know that if you add this little straw to the haystack or to the back of the camel’s back, it’s gonna break the camel’s back, and then you pile all these on. So what difference does it make to say that in there, do you think?

Yamachika: I don’t think it makes any sense, really. I mean all you need is to pass one bill and the money committees were good about passing one bill every year. That then brings up the second question about whether our constitutional spending ceiling is being respected. And, you know …

Coleman: We know it’s not, right?

Yamachika: Yeah. If the legislators consider it and then take an informed vote, that’s one thing. If they routinely vote to break it every year, I think it’s just basically taking advantage of a loophole.

Coleman: That’s right. Well, please clarify for me, I’m not sure. Why are they saying this in each bill that if this bill is passed, it will exceed the budget limit?

Yamachika: Yeah, it beats me. [laughter]

Coleman: Because one bill doesn’t do it, right? It’s the combination of all the bills and so what you really need is once all the bills are passed, then you have someone say, “Well, this total is in excess of the state spending limit. Now we need to all vote on whether that’s good or bad,” or somebody goes through and line-items out things. I don’t understand how …

Yamachika: That makes a lot more sense. That’s not how we do things here in Hawaii.

Coleman: Well, I’m looking forward to having some groups step up on this too, unless somebody can propose a constitutional amendment. Somebody would have the gall or the courage to submit a constitutional amendment.

But similarly, we’re talking about the blankety blanks, right? That’s what we’re talking about again. If somebody would step up and propose that this is not acceptable, this is just totally …

For example, the Grassroot Institute of Hawaii, I think it was the Insurance Stabilization Fund — We just submitted testimony yesterday. I think they’re having a hearing today on that bill — that, you know, the first time this went through, I think we commented on it that we didn’t support it because it had, it was more taxes, you know, basically, and there’s other ways of dealing with it.

And now the second round is like, well, geez, now we really don’t support it because we don’t even know what you’re talking about anymore. You know, at the very least, put the language back in so that we can figure out what you’re talking about. You just can’t throw out a bill. The assumption has to be that you’re gonna raise taxes. And it’d be really nice to know by how much, and maybe that could cool the jets of some people that might be opposed to it, but …

Yamachika: Yeah, I mean, that’s I think a key, a very key point right there. Even if you have a bill that you know is a tax increase, you got to know by how much. Some people will say, well, it’s probably OK if it’s under a certain amount you know. But if it’s, you know, 100%, 200%, you know, then people are going to go huhu you know?”

Coleman: Right, right, right. Are there any legislators that you’re aware of that find this practice you know weird or you know reprehensible even? Who are the reformers that you know we could talk to at the legislature about something like this?

Yamachika: Well, I’m not sure that the reformers would be able to do something given that leadership is, and by leadership I’m talking the powerful committees are the ones putting these blanks in.

Coleman: Yeah, let’s see which committees are we here talking about? Oh, do you think it was the committee that’s hearing these today that  did that? Like this is Committee on Ways and Means and Senate Committee on Judiciary. Now, do you think it was people in those committees that did that, or was it the committee that heard them previously?

Yamachika: Well, in House Bill 2404, the tcommittee that put, you know, a jillion blanks in the bill is House Finance.

Coleman: Oh, uh-huh.

Yamachika: And I’m not trying to single out any committee in particular because it’s a widespread practice on both sides of the aisle. It’s become ingrained. So what do you do about something like that? It’s a problem. 

Coleman: At the Grassroot, our paying attention as closely as you have been for so long is more of a recent phenomenon. We’ve really ramped up our paying attention to what’s going on at the blood sites you’re only in the last few years in terms of specific bills and submitting lots of testimony. And so I had never noticed that prior.

And I’ll bet money that most people have no idea that this is going on all the time too. So this has been a real educational for me to see it and it certainly strikes, I wonder if the Thousand Friends and the League of Women Voters know that this is going on. This might be their next, maybe this should be their next … And maybe what kind of awards could we, you remember the Rusty Bucket or the Rusty …. 

Yamachika: Scalpel.

Coleman: Scalpel awards? Maybe what would be the equivalent here is the Missing Calculator Award.

Yamachika: [laughter] The Incomplete Award.”

Coleman: Oh yes, that’s right. That was the title of your column was “Fear of the unknown,” which, you know, makes it all kind of spooky, but the title of the episode on the screen was “The incomplete legislative bills.” Yeah, there you go.

So moving forward, what do we do about, what do we say when we go to testify on these bills? In our case, we said, you know, basically, please put the language back in. We can’t really talk about it. 

We had a headline on one of our testimonies that said, “We can’t, we can’t comment on this anymore. We don’t know what you’re talking …” You know, we don’t know what the numbers are. What do you mean?

Yamachika: I mean, the, you know, the legislative committees in the public ask all the time, you know, what’s the revenue impact of the bill? Right?

Coleman: Right.

Yamachika: And you can’t give one if the numbers are not there.

Coleman: Did you submit testimony on this bill, Tom?

Yamachika: Yes, we did.

Coleman: And what did you say? Pardon me for not knowing. Pardon me for not having it at hand, but what did you say?

Yamachika: No, we talked about that, you know, the income tax brackets in current law, many of them have been in place since the ’60s. And, you know, inflation has done a lot since then, and now the the tax brackets, you know, at the low end are what, you’ve got two two or three different tax brackets for income under $10,000, I mean it’s meaningless

Coleman: When money used to mean something.

Yamachika: Yeah, I mean today those brackets are meaningless, so why have them in the code. I mean, it just makes life more complicated for everybody.

Coleman: But they didn’t take them out of the code, and they’ve added more brackets or something right?

Yamachika: Yeah, so now we have like 12 or 13 total, which is I think one of the most complex in the country.

Coleman: Yeah I think it will be if that happens. Well It looks like the Legislature needs to be revamped a little bit in what they do if they want to be fair to the public in terms of being able to comment on legislation that might be affecting their lives. 

Any last word, Tom? We got 15 seconds.

Yamachika: Blankety blank.

Coleman: [laughter] That’s right. Well, thank you very much, Tom. Good talking with you again. Thank you very much everybody for tuning in. I hope that you learned something and that maybe you can do something about it because it was something sounds like something that needs to be fixed.