 Back. It's a given Friday. It's 10 a.m. and we're talking tax with Tom Yamachika, which we really enjoy doing because we get a handle on the real deal in our community and our society and our government. Hi, Tom. Welcome back to the show. Thanks for having me back. And by the way, it's Thursday. Oh, thank you very much. See what happens. You get disoriented. And, you know, I'm so sorry to see about what's his name Cuomo, Chris Cuomo, you know, the fellow, the caster on CNN, the one who rotates with Don Lemon, our hero, and he's got it and he's isolated himself in his basement. And he's continuing to broadcast. I think he knows what day it is. That's the thing. Anyway, let's talk tax, Tom. You know, usually when we talk tax, we have the context of a working legislature. We have a working tax office. We have the regular issues about what what tax is appropriate and what tax is not appropriate and how we're raising and spending money. All those fiscal policy things that you and I have discussed, but that's all upended now, right? It isn't like it was two, three weeks ago, is it? Not at all. And government operations are being upended as well. And it's much more, you know, much more difficult to keep tabs on what exactly is going on within government. The governor has issued some emergency proclamations and they have the effect or the intended effect of cutting off a number of the government transparency protections that we rely on, such as the Open Meetings Law, the Sunshine Government and the Sunshine Act, the Open Records Law, which we call the Uniform Information Practices Act. So it's really tough. You know, it's tough as it is with us being, you know, basically shackled at home to keep tabs on what any agencies do. The agency offices are for the most part closed. So how can you get anything done? I mean, it's very difficult. Yeah, that's interesting. You know, I didn't know that he could do that by proclamation. I didn't know that he could knock off a statute by proclamation. In fact, I'm not even sure it was a proclamation, might have been less than that. You have any feeling about whether that's legal? And they say that their suspension of these laws was authorized by, you know, 127A-12 and 127A-13. But what those statutes say is, yes, the governor is given additional powers during an emergency. It says that the governor can relieve hardships or inequities or obstructions to the public health safety or welfare. It says the governor can suspend any law that impedes or tends to impede emergency functions and allows the governor to suspend the provisions of any regulatory law for prescribing procedures for out-of-state utilities to conduct business in the state. Well, which of those is happening? How does allowing people to see what government is doing obstruct their functions? Their answer, and I quote, as this is a global pandemic and a serious threat to the safety and welfare of our state's population, the laws were suspended to give government the maximum flexibility to focus its attention and personnel resources undirectly addressing the immediate situation at hand. When the situation is stabilizing, there is proper leeway to redirect those resources and suspensions. Oh my goodness, that's pretty scary. This is a time when it's very important, you know, dealing with any epidemic or pandemic, one of the legs on the stool to deal with is always communication with the public, being candid, being timely, you know, being honest. And I think we've had problems with that both in the federal, of course in the federal, because, you know, Donald Trump doesn't know how to be honest. And also in the state, we haven't gotten timely information. We've gotten, you know, information that's designed to avoid concern. But that's not what we need now. We need an honest broker who would tell us what's going on. And when you talk about suspending information practices and sunshine, you're really saying we're going to control the information flow. That's very troubling, because there's no need to control the information flow. It reminds me of a totalitarian state. Yeah. And we're getting, you know, we're getting a lot of information from the government, but it just says the federal government is being spoon fed to us on a daily basis. And some people, you know, take it for gospel. But in fact, it's really not gospel. You have to do your own critical thinking. You have to find other sources. Unfortunately, a lot of people rely on social media, which is probably not a good idea in these times. There's a lot of misinformation on social media. The only reliable sources are going to be the, you know, the standard in print, mainly in print sources, like the Times, the Post, the Guardian, those, those sources, and Think Tech Hawaii, of course. But, but Tom, you know, you talked about government operations. Are we stuck because we're paying all the government employees? Are we paying the people who are home, you know, out of their jobs? Are they working? Do you have any sense of what's going on there? Well, you know, when we had an economic situation under under Governor Lingle, which was, you know, some years ago, we had what you may remember as furlough Fridays. So they tried to basically keep government afloat by saying, well, every, every Friday, nobody works, nobody gets paid. But I have not heard the term furlough in anything coming from state government. So we assume that everybody's still working and everybody's still getting paid. And there have been no changes to that. That's dangerous, isn't it? You put people in a confined area and you don't give them, you know, personal protection property. Then your risk having the virus go around the whole area and then, you know, workers including real workers. They're still being paid to work. But they may not be, you know, in the office. Matter of fact, the offices are closed. Yeah, so a lot of them are teleworking. Some of them come in, you know, on an occasional basis. But if you call an agency, they may not answer the phone. You may have to record your message. If you go down to the building, you won't even get in the building. There's the building's locked. What are you going to do? I have a feeling there's some things that the government doesn't want to tell us about how this is working. Maybe that's why they froze up the information statutes. So let's talk about, you know, let's talk about expenses. Let's assume that most state employees, if not all of them are being paid, I don't know about county. Don't know. Maybe you know something about county. What about county? Are county workers, you know, at home? Are they being paid? Are they on the job? And how many of them are essential workers? I think they're operating under kind of a similar environment to how the state's operating. So their offices may be closed, but they're doing the same kinds of things that they were before, at least in theory. The time horizons for accomplishing these tasks may have kind of gotten shifted. We may or may not know that, but I think that's what's happening. Yeah. And it's also a priorities issue because, well, government only in this state only has so much money before it runs into the constitutional provision that requires balancing the budget. And revenues are way down. Were the state tax deadlines extended as the federal? People have to file on time this year or they have a grace period. What's happening? Yeah, the Department of Tax issued an announcement saying that if you have a 2019 return, that is due April, May, or June, you get until July 20th to file and pay. But that only applies to income tax. It doesn't apply to GE, terms in the comm, or any other tax type. It doesn't apply to withholding. It doesn't apply to income tax for any other year. So you still have to pay your estimated income tax if you owe it at the normal time, namely April 20th, I believe. And again, you have to file and pay file returns and pay taxes for any other tax type such as general exercise, transient accommodations withholding or anything else you may be liable for with no changes to filing or payment deadline. That's what we have. Is that intentional or just an oversight? No, that's, I believe, intentional. The HS CPA, the Hawaii Society of CPAs, and others presented the government with a laundry list of what they wanted in terms of relief. What I've heard is that there was a meeting at the fifth floor shortly before the initial announcements came out. And the result of that discussion was incorporated into that announcement that came out that afternoon. It doesn't sound practical to me. I mean, take a mom and pop, mom and pop business, they're closed. They have to be closed. Say it's a restaurant, retail, you know, they're not going to make any money right now. They have no cash. How they're going to pay the taxes that, you know, that's just not going to work. Is it you're going to have a state full of delinquents? Isn't that what has to be happening? Well, I mean, in theory, the taxes imposed on the income you get. So if you don't have income, you don't pay tax. And I think that's how they're justifying their position. They're not paying tax. So you get some money in the door. It doesn't matter that you got to pay the utilities, you got to pay rent, you got to pay some other stuff. Hey, you got to pay the state first. I think that's what their mentality is. Yeah. So, okay, it's a priorities issue. Well, in any event, the state's not going to get, not going to get any revenue out of that. And by the way, if they're supposed to pay income tax and they have no money, they're going to pay the income tax either, whether this is delay in the filing date or not. But so now the state is not, you know, I don't know if there are numbers out on this, probably not. The state's not receiving any, any significant tax returns or tax payments right now. So there's nothing coming in. So virtually nothing going on. I think that's the beauty of the position they took. And that is, you know, with the final return, a lot of them are for refunds. A lot of individuals, which is where the state gets the returns this time of year, they get individual returns. A lot of them had withholding tax and they withheld too much and they want to refund. So if those people get delayed until July, then the state makes money. On the carrying cost. So what I've been telling people, and this is very important, is if you got a refund coming, don't wait. You don't have to wait. You can file now. Well, what a great idea. Sure. You don't have to take the delay. You can, you can act right now and demand your refund. Think they're going to get a refund? Well, I'm not sure. There's also precedent for that. Again, during the lingual years, I remember the department, when it was under Kurt Karl Fucci, they requested for, I think, a delay in payment of all refunds until July. And that's what they did. I don't know if the same thing is going to happen this time around, but that's, again, not without precedent. That's happened before. Yeah, but this is different. This is plenary. So here's the legislature. We're going to recess. And I guess that means we're not going to see any legislative activity per se, any further processing of bills or adoption of bills, new statutes, this session, or what would have been this session. So what's the effect of that? Now, we know there are a lot, there are committees. I mean, I know there's a task force in the Senate, probably something in the House, where legislators are talking maybe by remote to what are we going to do now? What are the issues here? But the legislature's not in session. And those are committees that are talking, but they really can't act. I suppose they could recommend that the governor make more proclamations, but they really can't act as a legislative body. What happens? What happens if there is a need for a statute, either a positive statute advancing some initiative or a negative statute repealing something that's problematic in the time of the virus? What happens when you don't have any legislature? Well, you either wait or you ignore the statute, which is what some people are doing, and some people are doing it officially. Because that includes government officials, they get to say, oh, this statute is inconvenient. And there are several statutes that the governor did suspend from Totem. Yeah, well, okay, I suppose you can do that under his emergency powers. Emergency powers, yes. Okay, let's talk a little bit about the bailout, the federal bailout. Because the state still has people who need federal bailout money, a lot of them. And the state has a number of benefits, social safety net benefits, it has to fund somehow. And I wonder, first question is, for the lack of any significant tax receipts, and maybe the obligation to pay some refunds on the income tax side, but what happens to the benefits for the social safety net? What happens to the state obligation to take care of its people? I'm not even getting into and force the laws and police fire and what have you on the county level. But what happens to the social safety net within the state when the state is not receiving any tax receipts? Well, there, typically, what happens in a situation like this is that the governor does have power to restrict any and all expenses. And it typically just does that, irrespective of what the budget says. You know, the governor has the authority to impose like across the board caps or across the board restrictions on spending even budgeted monies. So that may probably come to pass. We've seen that before. We've seen across the board restrictions in several prior years, including with this governor and some previous ones. So that's one handle that's available to pull in economic downturns like what we have now. We do have some money soft away for emergencies. We call it the rainy day fund. That can be tapped into to fund programs that are considered priority. And I think that's going to happen. But that won't last forever. But hopefully it'll last us through the few months that we have to endure this pain until this coronavirus thing starts either going downwards either by itself or because we found some kind of medicines or cures to fight the darn thing. Yeah, well, I want to get into the duration issue in a minute. But I want to ask you, you mentioned that he might cut expenses. Well, it's one of those expenses, the payroll for these various state employees, a ton of people, thousands of people. And some of them aren't really being productive right now. But as you suggest, many of them are being paid anyway. Would you have the power to terminate that payroll or cut it back? Would you have the power to stop other functions which are really less important than feeding people and the like? Yeah, that power certainly exists. We saw it in furlough Fridays. We can see it again. Yeah, okay. Well, see what happens. I mean, I think the press has to be there at these conferences, where he gives us the daily feed of news. Let's turn to the federal. Okay, so clearly the state and its benefits alone and its funds alone are not going to be able to handle all these people out of work. The unemployment compensation benefits are nowhere near what's going to be necessary. So we have a household crisis. We're already in it. April 1st has come and gone. The rent has been due. And landlords are not prevented from collecting. I don't know how the courts are operating on that, but landlords have not been legally barred from demanding the rent. And the same thing with the banks on mortgages and loans. The first of the month, that's when it's due, usually. And so people are in crisis already. And the federal government is supposed to be distributing $2.2 billion around the country. I guess a lot of that goes to the corporate world, but a lot of it also goes to social safety net types of programs. And I wonder how that works. How do you coordinate that, if at all, with the state social safety net? Is that money going to come through the state? How is it going to be distributed? How does it get coordinated with state benefits? Can you give me some information on that? Let's take a short break. We're here with Tom Yamachika. We're talking about tax. We're talking tax with Tom. We'll take a short break. We'll come right back and we'll resume our conversation mostly about the effect of the bailout money in Hawaii. We'll be right back. Aloha. My name is Duration. I'm the host of Finding a Future here on Think Tech Hawaii. I'm here every other Tuesday from 1 to 1.30 p.m. Here on this show, I cover issues around sustainability, global issues that matter for young people for future generations, and other social justice issues. So please join us. It's live streamed on Think Tech Hawaii and also uploaded on YouTube. Yeah, we're back with Tom Yamachika. And I was asking Tom, how do you coordinate the federal benefits that have just been adopted by Congress? Not funded. I don't know where that money is. We should talk about that. And the state benefits. How does that work? Sure. As I was starting to say before the break, there is this huge federal law that was just signed into law called the CARES Act. And it does a number of things, including it provides, you know, unemployment insurance funding for people who are out of work. It provides for paid leave for workers who have to take time off for virus-related concerns to, you know, if they're sick themselves or if they have to care for some family members that are, there are direct distributions to people. That's the $1,200 that you've been hearing about. And there are substantial distributions to the states and counties. So there's a lot of money that's being unleashed upon the country. And hopefully, it'll ease some of the pain that's kind of going on. So, yeah, a couple of thoughts about that. Number one is we haven't seen any checks yet. And I think there have been bureaucratic comments on that. At the first, Donald Trump wanted to sign every single check himself, or at least have his name imprinted on every check, the big signature of his, but then he backed off on that. And somebody else is going to sign them. But they haven't actually gone out. I mean, I haven't seen any news article. I don't know anybody who's actually received any money. Do you? What's the status of that? Congress started working on this almost a month ago. So where's the money? Where's the beef, Tom? Sure. The latest projections that I've heard is that the distributions will come in about three weeks, which is kind of how long it takes for Treasury to get its act together on this. Three weeks more. And I'm sure there are the three weeks more. Yeah, it could be more, depending on the kind of operational problems that are discovered and the, you know, the amount of changes that happen in the meantime. There was, for example, this question about what happens to seniors who haven't filed attack returns in a while. And the previous official word was, well, they got to file some kind of simple return. And the new news that I think was released just this morning is no, no, no, we don't have to do that. We'll take some information from Social Security and give you your check that way. Okay, so the money comes directly to the recipient, that $1,200 or I guess the addition on the workers or unemployed unemployment insurance that comes directly to the recipient. But then there's other money that goes to the state. So what is the state supposed to do with that money? I'm sure they'll find something to do with it. I'm sure they'll find something to do with it, yeah. Yeah. No, I don't think there are that many strings on it in terms of what it can or can't be used for, but it is for government. Yeah. Well, you know, I think what's interesting is if you take all these possibilities, one is what's in the till, the rainy day fund, anything the state gets from the CARE Act, you know, and that's not enough to deal with the crisis in the state because, you know, our state has been built on a monoeconomy, tourism and tourism and tourism has really stopped cold. A lot of people are out of work and it's not going to come back anytime soon. So can the state, you know, find money to do this? Can the state spend beyond the constitutional balance the budget limit? What happens if the state runs dry? Got any ideas on that? Well, we talked about some possibilities and when we talked about for a little Friday, we've talked about restriction of state expenses. All of that considered, all of that considered, all of that considered, but the state runs dry. There's no other way, there's no other money. The state, I take it, cannot print money like the federal government. No, they cannot. San states can't go bankrupt. No. Counties can't go bankrupt. Yeah. Yeah, cities and counties can, subnational, you know, cities or counties can file Chapter 9 under the bankruptcy code, but there is nothing for states. They're not supposed to Yeah. Another possibility, and this is what something that we've been seeing at the legislature already is that if you have industry favored or industries with favorite treatment, like tax benefits, then they may be approached and say and asked to give some of it back or to walk the benefits back. I know this has already happened with the movie industry. Um, so other industries that have some kind of favorable tax treatment may be approached as well. Yeah. And you'll make sense for them to do that. Sounds like, you know, things will have to be adjusted as we get closer to the bottom of the barrel. And of course, the priorities and expenses can be examined and changed perhaps by proclamation under the emergency declaration. But you know, one thing is the legislature. I mean, the legislature will have its hand, its work, you know, cut out for it next year to try to tune things up and get into more solid footing in a time of crisis this way. And you know, the big issue is whether the legislation because the legislature is supposed to be setting the priorities. That's their job. And the and the administration is supposed to be following the laws that are enacted by the legislature. Yeah. Well, the legislature may or may not be in session next year. If this doesn't get better, we may have the same kind of ongoing recess, don't you think? Well, I think, you know, there is some recognition or realization that the work needs to go on and they have to figure out some way to do it. You know, perhaps by, you know, doing these virtual meeting things, they can accomplish maybe not everything, but most of what they have to do. Yeah. That has to be something that these committees should be studying, namely how they're going to actually make legislative determinations. How they're going to deal with this either now in 2020 in a special session by remote, you know, Zoom type connection and voting, which by the way, might be might be appropriate for voting in general. And of course, next year, when it's really going to be incumbent on the legislature to reexamine the priorities and help, you know, balance the budget or whatever they have to do to get on a more solid fiscal footing. Well, Tom, there's more to come. We're in a crisis and that crisis includes a fiscal crisis. And we need to talk to you on a regular basis. So I hope to see you the next few weeks so we can follow up on what's going on. Thank you, Tom Yamachika, talking tax and other fiscal policy. Aloha. Stay safe.