Additional Car Tax Dead for Now

by Tom Yamachika, President, Tax Foundation Hawaii

In our current legislative session, there had been a couple of bills that would have created brand new taxes for us.

One of them, House Bill 2604, would have slapped a new $1 per ticket tax on concert tickets on top of the general excise tax that ticket sellers already pay.  The incremental revenue from the bill, in theory, would have given a shot in the arm to the State Foundation on Culture and the Arts.  Although that bill crossed over from the House, it did not survive a joint hearing in the Senate.

The other bill, House Bill 2030, revolved around a Robin Hood concept, namely robbing from one class of taxpayers to reward another class.  The bill’s reward was a rebate for taxpayers purchasing or leasing an electric or alternative fuel vehicle.  A new zero-emission vehicle would get a rebate of $5,000, a new plug-in hybrid would get $3,000, and used clean energy vehicles would earn $2,000.  Except that if a taxpayer made more than 300% of area median income, the taxpayer would not be eligible for the rebate, and if a taxpayer made more than 200% of area median income the taxpayer would not be eligible unless the Department of Transportation extended the rebate upward if funds were available.  (For comparison, the area median income for a family of four for urban Honolulu is $152,000.)  The bill also directs HDOT to offer an additional rebate of $2,000, over and above the $5,000, $3,000, or $2000, to low- and moderate-income households.

The scary part of the bill is how these rebates are funded.  The bill would impose a new tax on the sale of new or used gas-powered vehicles, including hybrids with batteries.  The bill creates three tiers of tax based on miles per gallon.  However, the beginning and ending MPG limits are blanked out in the bill, as are the tax rates.  So, we don’t know if the bill seeks to impose an additional tax of 1%, 10%, or 100%.

This, by the way, is what we call a Blankety Blank bill, as we have written about before on many an occasion.  In an article from 2019, our own Hawaii State Tax Watch Doggie coined the term.  How is it even possible to pass something like this, with blanks obscuring the truly important information in the bill?  Are legislators voting on a small tax hike, a medium one, or one of Brobdingnagian proportions?  Even the legislators themselves can’t know.  They can just trust that acceptable numbers will be inserted at the appropriate time – during conference committee negotiations, most probably, where public input is neither requested nor allowed.

This session, the Senate Transportation Committee saved all of us the trouble of worrying about this bill’s fate.  It deferred the bill.  The committee chair noted that the Ways and Means Committee, which is next in line to consider the bill, refused to hear the Senate companion bill that her committee passed out earlier this session.  That committee “is not in the mood, at least for now, to do this,” she said in announcing the deferral.

That, of course, is no guarantee that the bill is dead.  It might get resurrected this session if it, in Frankenstein fashion, is grafted onto another live bill.   Or it could be reintroduced next session.  Is it what we as the people of Hawaii want?  Is it what you want?  Then let your legislator know!