We Need to Keep What We’ve Won

by Tom Yamachika, President, Tax Foundation Hawaii

Recently, the Legislature passed, and the Governor signed into law, a bill giving us taxpayers one of the largest, if not the largest, tax cut in Hawaii’s history.

The bill was not without its detractors. Some screamed and howled and said that the wealthy, whoever they are, shouldn’t have received any cuts because, well, “they could afford it.”  Others, including agency heads in our state government, quietly fumed about how they could possibly afford to cut their budgets to balance the magnitude of the tax cuts. And they reportedly received a memo from the Governor requiring them to slash their budgets by 15%.  What a pain!

For any of these detractors, especially the great majority who are not in elected office and thus don’t have to worry about facing the electorate in November this year or in 2026, the answer is simple. What’s done can be undone. They might already be thinking about bills to introduce next session to reverse all or some of this year’s losses.

In the recent past, juicing up the tax code to bring in more revenue was the order of the day. In 2021, for example, lawmakers took away the sharing of the Transient Accommodations Tax with the counties that had been in place for decades, instead telling the counties that they would be able to impose their own hotel room taxes at a rate to be set by ordinance but not more than 3%.  After that law was enacted, which lawmakers had to do themselves by overriding Gov. Ige’s veto, the counties all scrambled to get a 3% county tax imposed. As a result, visitors to our islands who are staying in temporary accommodations need to deal with 10.25% state TAT, 3% county TAT, and the ubiquitous 4.712% state General Excise Tax.

A few years before that, you may remember back in the early 2010’s that the TAT was hiked from 7.25% to 9.25%—but only on a temporary basis, our lawmakers told us. When the end of the temporary hikes arrived in 2013, lawmakers passed a bill making those TAT hikes permanent. “We needed the revenue,” they said.

Thus, it is no stretch of the imagination for us to be thinking that some shadowy cabal of folks already is plotting to introduce bills to stop the bleeding from this year’s House Bill 2404. Maybe they are thinking of taking the bull by the horns and reversing the tax cuts. Maybe they are instead planning to squeeze taxpayers by hoisting the rates on another tax type, like the GET or the Conveyance Tax. Bills to significantly increase the Conveyance Tax, for example, have been introduced in each of the last several legislative sessions.

As a result, we are likely to see all kinds of tax proposals in the next legislative session in 2025.  Maybe the tax proponents are thinking that it will be easier to pass tax hikes next year when no lawmaker will be up for election.  As a result, those of us who want the tax cuts to stick will have our work cut out for us. We can’t afford to let those bills sail through the legislative process unchallenged.  We’ll need facts and data, especially if the tax cuts start driving economic indicators upward.

It takes some work even to keep the wins we have.