 Yeah, talking tax, parking tax as a case may be. Tom and I noticed that really funny thing with the dog jumping up and down. Name this exploitation of puppies. Exploitation of puppies for a good cause. Absolutely. So, you know, if you have a few bucks, go on PayPal, use the donate button on our website thinktechawaii.com and help us continue doing what we do. Because what we do is good, good for the community, good for everybody. It's a bunch of volunteers getting together and, you know, kind of understanding the world better and helping you understand the world better. So thinktechawaii.com, donate, blue button. All right, Tom Yamachika, we're talking about talking tax with Tom. The legislature is in session and no man or woman's property is safe. Absolutely. Donovan's dozen or more of tax bills there that are going to affect your pocketbook. Right. I kind of got the name from, there was a civil beat article that came out recently that had a whiteboard taken from Senator De La Cruz's office. And there were 14 bills, all of which were revenue raisers. Some of them are still alive. Some of them aren't. When it got to me, there were 12 still alive. So I called it Donovan's dozen. Okay. You can also call it the dirty dozen. I wasn't going to say that, I wasn't going to say that. It's not my script. Okay. So it might even be more than that. Why don't we talk about some of the ones that are on the Donovan list, if you will? Yeah. We spoke some time back about real estate investment trusts or REITs. There are two sides to this bill. One is that the proponents of the bill see what REITs are doing as a loophole in that they are in Hawaii, they don't pay income tax because they're allowed not to under federal structure. The federal structure assumes that the dividends that the REIT pays are going to be taxed to the shareholders and the tax paid by the shareholders. But if the dividend recipients don't live here, they don't pay to Hawaii, they pay to someplace else. Okay. REITs, on the other hand, say that they're more than paying their fair share through GE tax, property tax, and other things, even if it's not income tax. The debate would pay GE and property tax anyway, whether they were a real or just an ordinary corporation. Right. Right. And one thing that strikes me, and maybe you have a better handle on it, is that in Hawaii, which is the object of affection by many capital concentrations on the mainland, we have a fair number of REITs. In fact, large projects and properties here are owned by REITs, perhaps more than you would expect. Yeah. We have in Hawaii, I think, the largest concentration of REITs per capita than any other state. By far. There was some graphs that the REIT proponents put together, or the REIT bill proponents put together, and it's very remarkable. I mean, most states are like this, and then Hawaii comes up at the end like that. Yeah. The way we've developed since statehood. We do need capital, and I suppose an argument that would be made by people who oppose this bill is that this will disencourage capital investment in large projects, such as what we have right now from REITs. Right. That's their argument. So the question is, well, if we pull the plug on taxing REITs like Vermont has, New Hampshire has, are the REITs all going to go away? I can't see that happening, primarily because a lot of them established themselves here to get federal benefits, established themselves here, knowing or in spite of the GET and property tax. And the federal government's got better because the corporate tax rate went down. Well, the prospects of this bill, I mean, it's well past crossover now, been a lot of discussion about it, still alive, and I guess it still has more proponents than opponents, although it does have some significant local opponents, actually. Yeah. So it's going to conference committee. So the House and Senate will work it out. They may pass it. They may not. A lot goes in the conference committee, dealings that we don't know about, because conference committees only take the votes in public, but everything else is back room. If this bill passes, what effect does it have on the ordinary Joe Schmo taxpayer? Well, we would hope that if the bill passes and REITs pay more tax, then it'll take some of the burden off the rest of us who otherwise would have to carry the burden of state government. Okay. All right. I'm going to see what happens. We have to regroup as soon as we can to find out how that goes. What else you got? Okay. There are some, I guess, more technical bills. Like there's one that does what we call single sales factor. And what that is, is when you have a multi-stake corporation or multi-stake business, the rule of science is, well, how do we figure out how much of its income each state gets to tax? Because obviously we can't control the laws of any other state, but the way it's come down is that pretty much all states have adopted a formula of some kind, and the variables that normally go into the formula are property, i.e., how much property does the corporation have in Hawaii versus everywhere else? So a proportion of the property here is against all the property everywhere. Right. And the same factors are computed for payroll and sales. Okay. So right now what we say is we average property factor, payroll factor, sales factor and take an equally weighted average of all three, multiply that by the corporation's total net income from everywhere, and the result is ours. That's what we get to tax. Is that used elsewhere? Yeah. Maybe the real problem would be is if you had different formulae in different states and it all added up to more than one. Well, that's a real problem, you see, because each state has different variations of the formula. Okay. And when you add everything up, it can be more than the net income of the corporation or way less depending on what it does. The most of the states up wait the sales factor in some fashion. California was one of the first to go double-weighted sales. Now there are like 30 something states that only consider the sales factor, and they basically wait at 100% and they down weight property and payroll to zero. So what we've been doing up to this point, I mean this can't be a brand new issue. What has Hawaii been doing? Basically the classic formula, which is average of property, payroll and sales. And what's the change in the legislature? Excuse me? Is there a change? Is there a bill? Yes. And how does the bill change that? So what a single sales factor just like the other 31 states. Okay. And so we would be consistent with more other states then. Yeah. The thing to remember though is that there would be winners and losers. You for example may want to really tax this one corporation because they know they have property and people here, but if all they do is export, we have a zero sales factor. And so we won't be able to tax them. So that may not be the best solution. They could have a loophole that way. Maybe or may not. Again, every business is different and you have a lot of different circumstances. So this change that's pending in Ledge right now, is this going to increase revenue and thus, you know, alleviate the burden on Joe Schmoe taxpayer? I have to say, I think the projections are that there would be some increase in revenue, but you know, who knows whether that's true or not. So it's a matter of looking at it, assuming the bill passes after the bill passes and comparing it to how things were before the bill passed. Right. These are very technical issues, but you know, it strikes me that like like the council on revenues, somebody and there's an equivalent federal agency to the office of management and budget makes a calculation of how much a change in the tax law is going to affect you know, the budget and the FISC in that jurisdiction. Do we not know? Is there nobody looking at how this would affect our tax revenues and there are revenue projections that are done by Department of Taxation. They don't necessarily show this with the public. Okay. All right. Well, maybe they'll share it with us if we ask them nicely. Good luck. Thank you. What else you got? Marketplace facilitators. We talked about this last time, right? Right. Right. So it's the Amazon Marketplace, the Walmart Marketplace and companies like that. They basically want to make them the retailers so they pay the tax and the people on whose behalf they're acting, they become wholesalers. They still have to pay tax if they meet the next standards. But their liability would then be just half a percent rather than four percent and we would primarily look to the Marketplace Facilitator companies such as the Amazons of the World. So Amazon is the Marketplace Facilitator and that it calls on some related companies, one of its affiliates, affiliated marketing company that actually makes the widget. It's an unrelated company. Okay. Yeah. So it could be like Dan's Dog Food in Texas. They want to reach a national Marketplace so they sign up with Amazon and they say, okay, fine, we'll do your marketing on our website, we'll send you our leads, you fulfill the orders or we can fulfill them for you and we'll take a cut. That's what they do. And they had been taking the position that if Dan's Dog Food doesn't have nexus with Hawaii, there's no liability. For any tax. Yeah, for any tax and then Amazon doesn't have to collect. And Amazon is not paying all the sales tax then because it's acting as a reseller, is that what you're saying? It was acting as an agent for Dan's Dog Food who isn't in Hawaii. So we want to fix that. Yeah. They were paying on sales that they made themselves. So if they did have affiliates do all the work like you were starting to say. And it says on the websites, fulfilledbyamazon.com, LLC, right, then they were paying tax on that. They charged a full 4% rate and we pay the 4% rate and no problem. Yeah. And they started doing this voluntarily like a couple of years ago and I think equal to 2017. But that was like half of their business, only half of their business. Okay. The other half was the, I act on behalf of somebody else. So what is the bill? What would the bill change? The bill is? It would pick up the other half. So as a result, collectively, they pay the full 4% or whatever the 4% rate is. Right. Okay. Speaking of which, how are we doing on an increase? I think that went away, huh, an increase in the gross excise rate? Yeah, that's part of the, part of the omnivans doesn't as well. Since then, the post finance chair said, you know, we ain't hearing the bill. So it's dead. Unpopular. Unpopular. I mean, they want more money. They're trying to raise as much money as they can. I guess, correctly, they see a need to have more money in the bank. But if they get an uproar over it, they're going to be reluctant. Yeah. And that's kind of what I see a lot with revenue raising bills. They start in the Senate. They cross over to the house. They get maybe a hearing, but they die in the house because every house member gets reelected every two years. That's, you're being very practical and realistic. That's my observation. Well, I mean, if I'm a legislator, better if I'm a committee chair, this sort of thing, and I get, you know, 100 emails on a given Monday morning that don't do that increase in gross excise tax, I'm going to think twice. And if every member of the committee gets it, hmm, they're all going to think twice. So I suspect that's what happened in the house. Well, but then, then of course, there's going to be nine other emails that say, hey, I'm a teacher. Please support us. Sure. It's all connected. We just figured that out. Hey, what else you had? Okay. There's a bill that would require partnerships, estates, and trust to withhold taxes on the income of non-resident partners and beneficiaries. Currently, we do this for S corporations, but that's about all when we have partners in a partnership or LLC members who derive income from business in Hawaii and the entity doesn't pay tax, we're supposed to put it somehow from the, from the member of the shareholder or the owner, you know, wherever it is. Sometimes those people live in other states, they're supposed to file and pay tax. Sometimes they don't. So this would, this would apply the same rule, who trusts states, who else, anybody else? There's those two. Trust estates, LLCs perhaps. LLCs, one of those. Yeah. Okay. Now, it was, it was interesting to us because when we were talking about the re-debate, okay, somebody else had introduced a bill to withhold taxes on dividend distributions by REITs. And the attorney general said it's unconstitutional. You said what? That it's unconstitutional. And so, so I was thinking, okay, well, if that's unconstitutional, then why is it that you can withhold on distributions to partners in a partnership or beneficiaries of a trust? Or a foreign corporation. Yeah. I mean, at some, at some point. What's the argument exactly? What provision are we talking about? A Commerce Clause? What? Uh, that there's no jurisdiction to tax the, the shareholder because there's no nexus. Because the, the no nexus, they're not here. Yeah. But you're not actually taxing them. You're, you're causing the entity that is paying them to set aside the money. It's different. Yeah. Um, well, I mean, it's, it's only valid if it's to, to enforce a, a valid tax obligation of the, of the owner, partner, whatever. Yeah. Uh, and it's just been tested in the courts. I don't think so. Hmm. Okay. So we're, we're really getting into Hawaii taking more aggressive steps. That's what it sounds like. Yeah. I mean, again, it's, it sounds like, uh, what we already do with S corporations. Because we do withhold on distributions to S corporation shareholders. Yeah. Why not LLCs? Why not trust in the States? I mean, it seems, it seems the same. I mean, is there, is there an argument to be made against applying this to other types of entities? Well, I think at some point you get so many shareholders that it's, it's, it's impossible to keep track of. But that doesn't sound to me like a, you know, a good justification for, uh, just working your tax line. Yeah. Do you think it'll pass? Uh, it's, it's still in play. Still in play? Yeah. And I mean, who would, who would oppose it? Would, would, I guess a trust company would oppose it? A trust would oppose it? Um, maybe, you know, a thing is an LLC is, is really a, it's just like a corporation in so many ways. Yeah. Well, um, the, uh, there's an association of what's called, um, publicly traded partnerships that, that was one exception for this because they, they're saying, well, yeah, we have too many members and, and, uh, it's, you know, difficult or impossible for the partnerships to know who they're paying. Again, something that I'm kind of wondering how, how logical that is, but that's, that's their argument. Yeah. You know, I mean, in a way, this goes back to the REIT thing in the sense that if we start being draconian and, uh, ever so aggressive about, um, you know, cutting the fruit off the tree before it leaves town, um, then we're going to develop our reputation and maybe some, Oh, we already have that. We already have that. So it's not going to make a difference. I'm going. Okay. All right. I mean, we're, we're not, we're not taxatucits or, you know, tax health Connecticut. Taxatucits. But, um, uh, we're getting up there. We're getting up there. We're being more aggressive this year as the leadership in the legislature is, uh, trying to raise more money in every way it can, you know, and spend less in every way it can. I, I'm not sure about that. Except for raises. Speaking of raises, we have an estate tax hike. I think we talked about that a little bit last time. No, no. Okay. There's a, there's a bill, uh, that will raise the estate tax rate, 20%, uh, on taxable estates over $10 million. This is the inheritance tax, the state inheritance tax. Yes. Yes. Um, which would, I think, uh, but it's, at the very top of the list, tied with Washington state for the highest estate tax. That's really too bad because, you know, we're supposed to be the top dog. Yeah. Right. We don't want to be the top dog. I mean, let's talk about, you know, our image, you know, and our reputation. Um, and that's pretty aggressive. And you want to encourage people to come here in their retirement years and buy them property and spend money and all those things that we have been trying to do since statehood. Now, that's, that's turning away people, isn't it? You want to tax their estates that high? Well, I mean, how many of us are worth $10 million? Okay. All right. Some, some people are actually, I could introduce you. Yeah. Yeah. And, and, and a lot of them create a lot of jobs here. So, I mean, are we telling them, okay, fine, uh, uh, you know, thanks for visiting, but go away now and go move to Vegas. Don't be a resident. Yeah. Don't be a resident because this is a, this is a fix to your estate. Not so good. So that's, to me, that's a turn off, arguably. Yeah. I mean, a lot of people are voting with their feet and, and, and these people who have money, uh, they are very much in a position to pack up and leave somewhere. So, I mean, this is $10 million. Uh, and, uh, this is going to be 20% of my estate. The other state doesn't have such a tax. I mean, I'm going to vote with my feet. Yeah. And certainly do that. Okay. Um, we've got a lot of things in the transient accommodations area. So, so there's a, uh, a tax that's imposed on time shift or the transient occupancy tax. Um, and it, it's currently involved, uh, imposed on half the daily maintenance charge for a week when you, when you stay there a week, they want to double that. Really? Mm-hmm. Double. I mean, that's pretty, that's a pretty dramatic increase. Double it. Yeah. Um, the, you know, the estate, I mean, the, the, the argument, the taxation argument had been, oh geez, this, this formula, uh, is really inadequate. It doesn't, it doesn't produce anywhere near the fair market value that we were supposed to tax. But, but my reply to that is, look guys, in the law that, that exists today, there's a, uh, there's a provision that says if you guys don't think that this formula is representative of the market value, you can assess on the fair market value. Just, just prove it up. They never proved it up. Ah, it sounds like somebody's lazy. Yeah, and then they would tell you, oh, this is clearly inadequate. They'll just double it. Yeah, so let's double it. The easiest way to cut corners is what, and avoid the, the dirty work of proving it up. Yeah. Yeah. Which, I mean, to me, to me, that leaves a bad taste in my mouth. Well, yeah, it's not, it's not good tax policy to do that anyway. Double the tax. Um, how, how good a chance does this have in passing? Okay. Um, it's dead on the house side, but there's, there's, there's a chance that, um, the Senate will, you know, shove this material into something that exists on the Senate side, or a hospital that's crossed over. Is this one of those, um, you know, bills that were the actual amount of the increases left for conference, and would be surprised after? No, not, not this one. Now, uh, one of the, one of the ones where we could have a surprise is there was an income tax bill that was approved by the House. It's now in the Senate. Right. It was supposed to basically just eliminate the lower back then compress the rest. But now all the amounts are blank. So it could be a massive increase when it comes out. We don't know. I don't understand how those things can be handled, um, by blanks. That determined in the darkness. Democracy dies in darkness. The public has really no input on that. Won't even know what happens. Won't be there. Right. And we'll find out by, by surprise, by ambush. Um, you know, after the bill comes out of, uh, the conference committee. There's a good reason to change the system, in my opinion. Yeah. That's what I think is a little extreme. I mean, you need to have something, uh, to confer about and, and, you know, when, when you have, when you have all blanks in a bill. Yeah. We'll be talking about trying to get a handle on what effect, you know, a given rate increase is going to have on, on the taxpayer and on, on the public fisk. How can you, you can't get a handle on it. You can't evaluate it if it's a blank. You don't know. And who is going to know if it happens in the darkness of a conference committee? Nobody will know. And it'll be wrong. How about that? What I don't understand is how our lawmakers can vote for a bill that contains everything blank. When the rate is everything. Yes. It's all about the rate. Tax is all about the rate. You could have a zero rate or a 100% rate. It's a big difference. It's a very big difference. Okay. That one is, that one's steaming right along then. Right. The blanks bill. The blanks bill is steaming right along. Now, still in the transient accommodations tax world, we had some back and forth about resort fees last time. And, and, and last year it resulted in a bill that actually got vetoed by the governor because they kind of defined a resort fee as everything. And, and, and it would apply to anything that a hotel provided to a guest. Literally anything. How do you value that? If it's on the folio it's taxable under the transient accommodations tax. So, so that was obviously too much. And this year they stuck with defining a resort fee as a mandatory charge. Okay. So if you stay the night, you got to pay this. Then it's, then it's part of the room charge, which, which I think is the, is, is a reasonable interpretation of the law. And it's actually that the department's enforcement position. So the bills, the bill has passed. It's going to go up to the governor. And it's probably going to be signed because it's consistent with the department's current. Yeah. And so a few tourists actually come down to the legislature and testify. Well, that too. But, and since it is consistent with the department's current position, it's probably not going to create, you know, a revenue increase. Yeah. Why do I feel this is a legislature of increased taxes. And when you say Donovan's dozen or dirty dozen, as the case may be, you're really talking about a legislature that is fascinated with fiscal, fiscal issues and is going to try to raise money in every which way it can. And without necessarily thinking of the effect on the, on the taxpayers or on the state's reputation or in the state's primary industry tourism. Am I right about this Tom? And I get a little concerned just smoozing with you here today. I'm always concerned. Yes, you are. That's your job, Tom. Yeah. I'm a professional warrior, I guess. That's Tom Yamachika. He's a professional warrior. And we love worrying with him. We want to come down again and again and give us a blow-by-blow dynamic description of what's going on in tax in the legislature. Now's the time. No man or woman's life or property is safe. Thank you so much, Tom. Thanks for having me on the show. Aloha.