The Upcoming 2025 Session

by Tom Yamachika, President, Tax Foundation Hawaii

The last month of the year has begun.  Black Friday, Cyber Monday, and its variants are behind us.  And the 2025 legislative session is approaching with blinding speed.

The House and the Senate have announced a new lineup of leadership positions and committee chairs.  The chairs of the money committees, which have sway over much of what we talk about in this space, are the same as last year.  The leader of the Senate is the same, but the top of the House is not.  It remains to be seen whether the policy direction for either chamber is going to be significantly different.

For us at the Tax Foundation of Hawaii, we will be closely watching the historic tax cuts enacted last session and seeing if legislators are willing to let them play out.  There will, I’m sure, be proposals to scale back or even scuttle some of the cuts.  Also expected are proposals to hoist the tax rate for capital gains to be the same as that for other income, which has been stewing in the legislature for some years; proposals to further raise the tax burden on tourists, continuing our years-long love-hate relationship with that part of our economy; and proposals to rise the conveyance tax to even more stratospheric levels in a battle against wealthy profiteers, real or imagined.

Even more important, however, would be proposals to increase transparency in our government and to bring about reasonable services to the people while minimizing waste and corruption.  Every large organization has its share of waste and abuse, and the more people are able to watch it, the less opportunity it has to abuse the trust that taxpayers have put into it.  This applies to state government as a whole, and especially to some of the larger agencies used to getting billions in appropriated money such as the Department of Education, the Department of Health, and the Department of Human Services.  (The Department of Budget & Finance gets billions also, but almost all of that is for debt service, giving the department very little in terms of money to play around with.)

We fully expect some agencies to be thinking up tricks and strategies to avoid budget cuts.  We wrote about one, the “Washington Monument Strategy,” not too long ago.  (This strategy can be dealt with by using budget provisos, such as with language in the budget bill saying, in effect, “You run this particular program, and if you don’t X, Y, and Z programs will lose their funding.”)  Another time-worn trick is to ask for, or expand, special funds that ONLY can be used by the affected agency and ONLY for a particular purpose.  Of course, the countermeasure to this strategy is either to limit or abolish the special fund and to put the agency’s funding in the general fund so the agency can go before the Legislature in public to justify what it is doing and how the people of Hawaii will benefit as a result.

We also should be working to take advantage of federal resources that have been made available to us here in Hawaii.  If we don’t, as with the Department of Hawaiian Home Lands in 2016, we may find those resources disappearing, either temporarily or permanently.  It has been no secret that President-Elect Trump doesn’t like helping blue states, even when it comes to releasing funds to help with disaster relief.  We absolutely need to take advantage of the resources we have to prevent the Feds from saying that we don’t need the resources and doing something about it.

Merry Christmas, Happy New Year, and let’s raise our glasses in hopes of a helpful and productive legislative session in 2025!