 All right. It's a one o'clock block on a given Tuesday. It's talking tax with Tom. Tom's the president of the Hawaii Tax Foundation, and it's important that we check in with him, especially during the legislature. But let me make some comments about tax here in Hawaii. In Hawaii, our salaries are too low. Our expenses are too high, especially the expense of occupancy. That means occupancy in your residence and also occupancy in your business. Because it's limited land and limited landowners, the result is it's too high. There's no way we're going to have the great Mahaley of 2019. So that's going to stay the way it is. And salaries are probably going to stay the way they are, although there's that minimum wage bill that's going to have an effect on, probably in my opinion, an effect on terminating a lot of small businesses. But that's another issue. And then we have the homeless. We have an intersection where there's not enough money to run the government or the community. And so we have 40, 50 billion dollars of unliquidated, unfunded liabilities coming up and been in existence and actually increasing. And we don't have enough money to pay for the necessary government services along with the bills that the government has incurred, which are unfunded liabilities. And which people expect the government is going to pay for. So you have a whole bunch of things in play here. And of course, the other thing in play is that people can introduce the strangest bills into the ledge. Bills that really have nothing to do with their intentions, their purposes, or a practical solution to a given problem. And the process in the legislature itself is strange. We really ought to fix that. One of these days, maybe one of these every 10-year iterations will have a real convention and fix these things. But for now, they're not fixed. All these vectors I just described are probably going to continue the way they are. And it all comes home, doesn't it, when you look at the tax bills that are introduced in every single session. And so Tom and I are going to talk about that today. And he made a little spreadsheet of all the tax bills. There are dozens of them. I just had lunch. It actually affects my digestion to look at all these dozens of tax bills. We're actually following about 300 of them. My goodness. This is a reduced list then. This is a reduced list. Because the list that you have before you, it's an 11-page list, but it's only the bills that had a hearing and are still alive. So the lots of them have been killed and lots of them haven't had hearings yet. No person's life or liberty is safe. Life or property is safe while the legislature is in session. And that slogan, which I mean some people may not feel the same way about it. Legislators don't feel the same way about it. But that slogan is especially poignant when you're talking about tax bills, isn't it? Yeah, that's my line. So tell us about the ones you think might pass and whether they are going to help us or not. Okay, well, let's kind of go through some of these that I find interesting. You say that the legislature is a strange process and they expect strange things. There's a bill that calls for the establishment of a repair and maintenance special fund. You know how we have education in DUI, our classrooms need repair and maintenance. It's backlogged $800 million. University of Hawaii into the $300 million. The list goes on. So they want to establish a repair and maintenance special fund. The bill also prohibits fund monies from funding employee salaries and costs. And it prohibits them from being considered as part of the employer's ability to pay those costs, which basically means they're going to tell the union you can't count this. And of course, the unions are going to say, of course we will. Who do you think you're kidding? We're the union. Do you think you can legislate away consciousness? I don't think so. So that's... What effect if it passes? I don't think it'll be any effect. You'll just be shifting money from one pocket to another one. So that's a waste of time, actually. I think it's a waste of time and effort. And it's not going to make the union forget about it already. No, and if I had an opportunity to revisit my landscape discussion a minute ago with all the constellations in the heavens, I would add the union to that. Because the union is part of all these factors and vectors that affect what's happening in the square building. And of course, now, do you own an electric vehicle or a hybrid or an alternative fuel vehicle? Well, there's a bill that's going to affect you. One bill that's now going through, and it seems to have a lot of traction, is going to increase the vehicle registration fee for alternative fuel vehicles, including hybrids and plugins and hybrid electric cars. I have one. And it's going to raise your annual registration from $45 to $60. Why? Because the Highway Fund needs money. They're not getting enough because of these fuel vehicles, the alternative fuel vehicles, who use the roads and they don't run on gas, so they don't pay the fuel tax. Didn't I see an article recently about how the efforts of the Department of Transportation to get more money out of the ledge were really tongue-in-cheek because in fact, they had money they couldn't even spend. I saw something to that effect. Yeah, I might have written that. Okay. All right, so civil beat it was. Yeah. And it was based on the State Auditors Report that where they went in, they took a look at the funds of the Department of Transportation and they found $120 million lying around in accounts that hadn't been touched for five years. Five years. Well, there you go. So the other thing as a policy matter, because they need money, doesn't work. If they really need money, take it out of the budget, don't raise this particular. Why? Because with every tax, you're sending a message. With every tax, you're incentivizing or disincentivizing public conduct. So here we have a policy that seems clear. I mean, I thought it was clear until we started having this discussion that we want electric vehicles. We want renewables. We want to minimize carbon emissions in the States. We want to incentivize electric cars. So A, we don't have tax credit for electric cars anymore. You probably don't have that in the 111 bills. And B, you heard them say that. We don't have a tax credit. We don't have a bill for a tax credit for electric cars, even though the State's policy is clearly to incentivize electric cars. And B, we're disincentivizing electric cars by raising the cost of registering them, singling them out to raise the cost of registration. What a great expression of policy. Well, but you can think of it in another way. And that is, you know, our roads and bridges need repair. Somebody's got to pay for it. Right now, we're having the users of the vehicles pay for it because you have through the fuel tax. But the fuel tax doesn't reach electric and alternative fuels. So what do you do? I mean, you have to figure out a way to get the alternative fuel vehicles to participate because they're using the roads. How do you feel about that, though? I mean, you raise, you create a special fund, a special tax for every little thing. Meanwhile, legislation is always pushing to increase the amount of the general fund. Why can't it just apply the general fund to this? Why can't it just put it in the budget instead of having to raise taxes for every little manini thing in order to pay for every little manini thing? Is that good tax policy? No, and we've been seeing for years and years, even under my predecessor, that special funds are to be avoided because you really want to have one pot of money. Everybody knows what's in there. Everybody knows what's spent out of it. With all these little special funds, there's billions and billions of pots of money, and we don't know who's controlling it. And the legislative oversight is... Zero to none. Well, spotty at best. Okay, spotty. Okay, so that's a great bill. And that's not all because there's another bill that, and I think I talked about it on your show before, that is going to apply a carbon tax. And that is going to be different because in place of our current fuel tax and our current barrel tax, there's a bill to impose a carbon tax, which is basically to tax the import of fuel depending on its carbon content. And this would replace effectively repeal the barrel tax and the fuel tax. That is correct. Wow, that's going to be a big one if that passes. Yeah, it's supposed to be a revenue neutral bill. Okay, Senator Rhodes introduced it. But the thing is it's going to redistribute the pie a lot, and there are going to be winners and losers. Okay, why? Because right now the fuel tax is basically pegged to use of the roads and highways and byways. Okay, so there is no tax on farm vehicles, right? Because they don't use the roads. There's no tax on electric generation. Again, because they don't use the roads. Carbon tax does apply to all fuel, no matter what it's used for. Or at least that's the theory. So the farmers and the electric companies could be big losers under this. Yeah, you mentioned that last time we spoke about this bill. And I guess what troubles me is that originally the barrel tax was supposed to help renewable, help develop renewable energy. The barrel tax was supposed to provide a fund for oil spill cleanup, should that happen? Okay, it was for environmental concerns. It wasn't to develop the lands. It's been everybody's orphan child. It's been split up 10 ways around the middle. Nobody knows what's going to happen year to year on the barrel tax. And if there was an intention at the beginning, that intention has been frustrated many times over in the years that followed. So the barrel taxes, you know, is everybody's play toy. And a lot of it winds up in the general fund, but some of it winds up in the Department of Transportation, which gets multiple special fund income. I really don't understand why there is no comprehensive coordination about these things. And I wonder whether there's any hope that the barrel tax, effectively repealing the other two, the fuel, I'm sorry, the carbon tax, effectively repealing the barrel tax and the fuel tax is going to be better or worse. What do you think? Well, I mean, in terms of revenue, it's supposed to go to the highway fund and some go to the general fund kind of mirroring the distribution of revenue as before. So that part doesn't change. But it's still going to be available for redistribution in any year? Well, it always is. Except that with the highway fund, there are some federal restrictions on it because deutrans is getting some federal highway money into it too. So they can only use that for transportation purposes. So you can't take stuff out of the highway fund. Although you probably would be able to put stuff in. So how did it work? Do you think it would improve things? Do you think, you know, this would rationalize our tax policy in this area or would it create more problems? Well, I think it's perhaps a step in the right direction because right now we have multiple taxes affecting fuel and with different policy rationales. And as you mentioned, each tax sends a separate message. So there's a lot going on in the fuel arena right now. Harmonizing it and putting just one tax scheme on it is probably an improvement. Interesting. Of course, there's a second shoe to drop and that is how do you implement the carbon tax? How do you distribute it? And how do you not change it going forward and not let it be an orphan child the way the barrel tax has been? Well, there's really no way to prevent that. No. Well, you know, I remember in law school, one of my professors, he said, he said, look, the legislature is not really expressing itself properly. At the end of any bill where they really mean it, they should say that. Right next to the effective date provision, they should say on this one, we really mean it. Please leave this alone. You think that would work, Tom? No, of course not. It's just trying to literally to the union. That's Tom Yamachika. He's the president of Tax Foundation of Hawaii. We're talking about the some, a few of the 111 bills that have been introduced this session 2019 about tax in Hawaii will be right back. Hey, loha. My name is Andrew Lanning. I'm the host of Security Matters Hawaii airing every Wednesday here on Think Tech Hawaii, live from the studios. I'll bring you guests. I'll bring you information about the things in security that matter to keeping you safe, your co-workers safe, your family safe, to keep our community safe. We want to teach you about those things in our industry that, you know, may be a little outside of your experience. So please join me because security matters. Aloha. Hi. My name is Amy Ortega Anderson, inviting you to join us every Tuesday here on Pinoy Power Hawaii with Think Tech Hawaii. We come to your home at 12 noon every Tuesday. We invite you to listen, watch for our mission of empowerment. We aim to enrich, enlighten, educate, entertain, and we hope to empower. Again, maraming, salamat po, mabuhai, and aloha. Okay. We're back with Tom Yamachika. He's the president of Tax Foundation of Hawaii. We are honored to have him every week or two. And he talks about tax. He talks about the legislature, bills and the legislature, and there are more than 100 of them. And we have a spreadsheet of only a few of those, the ones who had first hearings. Yeah. As I mentioned earlier, we're following about 300 bills. Oh, 300, sorry. Yeah. And out of a total introduce of maybe 3,000. 3,000, in total. Yeah. Tax, bills, how many? No, about 300. So about 10%. Okay. All right. So, I mean, that's enough. That's a lot. I mean, it's enough to give you a headache. And, you know, I mean, it's just a moment on that. You know, the legislators get requests from their constituents, I guess, or from lobbyists to introduce a given bill, and they do it pretty much all the time. And then, you know, what's the control on that? The committee chairs will either put the bill out for hearing or not, and that screens, you know, these thousands of bills into less fewer bills. But the reality that's what we see every year, that, you know, some bills go to hearing and some don't. Some make the deadlines and some don't. And lots drop off as the process go on. So at the end, when we start off with 11 pages, we're down to, you know, maybe five. Yeah. And then ultimately, only a few get actually passed. Right. A few actually get signed into law. You know, I mean, is it a fair concern for me to say, to suggest that if people have what is clearly a cockamamie bill, they shouldn't introduce it. And if legislators receive requests to introduce a cockamamie bill, they should say, now, now, this one's cockamamie, we really shouldn't put this one in. Is it fair to have that conversation? Or are we going to go on? Oh, sure it is. I mean, I was, I had a conversation, you know, a few years ago, when, when somebody introduced a bill at the legislature to modify a property tax exemption. Now, the lead, our state legislature doesn't own the property tax. It was, it was, it was partial up to the counties 25 years ago. So, so the, the legislature has no business monkeying with the property tax code because it doesn't apply to anything anymore because, because the counties have exclusive jurisdiction to levy property tax. Nevertheless, the bill went through the, went through the money committee. Oh no. It cleared the full house. We're nowhere to the Senate was killed in the Senate. And I, and I, and I said to the finance show, why did you move the bill? Because I was told to, oh, okay. So, so somebody needed a constituent satisfied. Yes. So that, that happened. Right. But I think, but, but I think somebody should have told them, look, we don't own the property tax anymore. You got to go to this, get to go to city hall. Meanwhile, our tax money was paying for all that process, all the time. And, you know, the process involved in handling and ultimately disregarding a cockamamie bill. I mean, it would be much more effective, more, more efficient, much cheaper in terms of legislative cost. If we didn't treat cockamamie bills, just a thought. I don't want to interrupt the flow here. And the flow is, what else you want to talk about in your spreadsheet? Well, there's a lot of stuff going on regarding the hotel room tax or the transient accommodations tax. You, you heard me talk about the Airbnb bill, which is, was intended to collect the, the taxes on transient vacation accommodations. You know, some people let out their houses for, for a week or two. They run bed and breakfast. They advertise on Airbnb or HomeAway or VRBO and get some money. They're supposed to pay tax on that money. Sometimes they do, sometimes they don't. And that's the TAT. That's the TAT. And what's the rate of that right now? Ten and a quarter. And that's more than gross exercise, but good. Well, you got to pay both. You got to pay both. You got to pay both. Together it's more like 15%. That's right. Yeah. And some people weren't doing it. Okay. So, so this bill gets teed up and it passes the legislature to allow these platform companies to collect the tax and pay it over the state. Well, you know, a bunch of the county got their pennies in a bunch because they say, well, these are all of the illegal vacation rentals. They're not allowed into our zoning laws. And so I said, you know, then why in God's name go to enforce your zoning laws? Good question. Yeah. They never really came with a good answer for that. So this year, there are several bills that would give the counties various things if they have an enforcement mechanism in place and they actually use it. So there are some bills that would give them a million dollars, but you don't get a million dollars unless you come up with a system for TVR enforcement or they will give the right to surcharge the TAT to the counties. So, you know, like the counties right now have the surcharge ability over the GET, they would let the counties do the same thing with the hotel room tax. Why am I getting a headache about this? So you tell the counties, if you are enforcing the zoning and not permitting your BNB in a given neighborhood, I guess, then if you do that, we will let you tax them the TAT in the other neighborhood. Did I get that right? Yes. So strange. Yeah. Of course, the enforcement is going to be, what, elusive? Even if they say they'll enforce, don't you think? Well, yeah, because it's very interesting because if the counties don't enforce and people, you know, lend out the property as a vacation validation, it becomes more valuable and they get more property tax. So is it really in the county's interest to enforce this stuff? The strange anomaly will be, okay, well, this neighborhood is zoned out, can't do that, okay? But if the county doesn't enforce that zoning law in that neighborhood, then the good news is, under this approach, that the people in that neighborhood rent out, they don't have to pay TAT. They get away with it on two levels. It's a strange confluence of sanctions. It really is. I mean, I think the counties really have to decide, okay, do we really want this kind of zoning and this kind of prohibition? If so, enforce the darn thing. If not, open it up, license it, tax it, do what you want. It's like the syntax phenomenon, right? You have tobacco, you have liquor, you have all these kinds of things and there are part of the state says, well, this is not good for you, so you shouldn't be doing it. So we're going to charge you money if you do it. But if you really wanted to stop them from doing it, wouldn't you ban it? Well, I take the money, just ban the stupid thing. The mixed message. So I mean, really, it's so totally inconsistent and strange that, you know. But we do it all the time. We do it all the time, but it's bad law. It's bad law that leads to a bad view of law, right? It leads to law scoffers all over town. This is not a good thing. Somebody got to think this through a little better. Yes, it's basically, you know, a schizophrenic view of social policy. Yeah, yeah. Well, social policy and tax policy are pretty close. They're aligned in so many places. Okay, that one, is that sounds, is that got traction, that one? There are several different variations of it moving. So yeah, it does have traction. Then you have several variations moving. Does that speak of a greater likelihood that some combination will pass or a less likelihood that anything will pass? Well, I think the former, because if the idea was doomed from the beginning, then the pieces would die off. So it wouldn't have got this far. Yeah, that's what I think. Okay, what's next? Okay, on the general excise tax side, we went after the online sellers, right? And that was kind of part of the national push. And the Supreme Court said, okay, you can do this. And we now have a new nexus standard. So if you're an online seller, and you make $100,000 of sales into the state, or 200 transactions into the state, then you've got nexus, you got to pay our tax laws, and you pay our taxes will be our tax laws, you know, that kind of thing. Okay, the next wave after the online sellers is the online marketplaces. So right now you have like Walmart marketplace, Amazon marketplace, things like where the online platform is just acting as a distribution mechanism. What's the difference? Well, the difference is the online platform considers themselves to be an agent of the little seller, and the little seller doesn't have presence in your state. So they don't withhold tax, they don't do anything. Okay, okay. More and more, that's what you see, right? Because they're kind of aggregating a number of little sellers. Yes, you can see that on fulfillment, even in Amazon, that you're really dealing with someone else. And the other person is going to ship it to you and so forth. It's got the Amazon label, so to speak, but the other fellow is doing it directly with you. Right. Or that's the theory. So the question is, how far can you let them get away with that? And what do you do about it? What are we doing about it? $100,000? But is it nuanced there? Is there a nuance to say, we're treating the platforms different than the direct online sellers? Or is that left for regulation or further statute? Well, right now, it's kind of being considered as further statute. And that's what's happening with this bill here. It's still being considered, hasn't died yet. In a couple of weeks, we may no more. Well, we have to meet in a couple of weeks. Before we go, though, I wanted to ask you about Amazon because we've seen the protests in New York. The governor and the mayor made a deal with Amazon to come to Long Island City and offer, I forget how many jobs, 35,000 jobs and build a new community and spend billions and get tax savings of $3 billion on top of that. And when Amazon representatives actually came to Long Island, they saw these protests and people were bad mouthing them left and right and saying, you know, honky go home. So I guess they made the decision, fine, we don't need this. I personally agree with that decision. Why get involved in an hassle here? Too much hassle. We're not going to get involved in a political thing. And Alexandria was leading that as a political matter. She wants to make a protest. And the protesters brought it down. So my question to you is, did we make a serious attempt to get Amazon here? Did we offer them any significant money as a tax forgiveness, a tax benefit? Is there any chance that we would have engaged like that with Amazon or we just let it go? I don't think we're even close. Yeah. But we're out in the ocean is the problem. Yeah. Yeah. I mean, it doesn't make sense to have us as a distribution center. Yeah. Yeah. Assuming we were not, though, assuming, you know, all the factors in the legislature and the way things work in terms of tax breaks, could that ever happen here? Assuming we're on the mainland, the state was on the mainland. Could that ever happen here? I don't think so. Because we would have people resisting it. Well, we do offer tax breaks to other industries like the movie and film industry. We give them fairly decent breaks so we can remain competitive with other film destinations like the Mexicos and Puerto Rico and the Louisiana's of the world. And indeed, it's very competitive. Yeah. And they do compete. Yeah. And they compete with the state. So there's a relationship between what happened in Amazon, although this isn't a good location for it and what happens with film for which it is a good location. Yeah. So I think, you know, if we identify a particular arena or industry niche where we are in a position to compete, we will. I hope so. Yeah. I hope so. I hope people don't say, you know, I don't want to give money to those guys that let them find another way. I think we have to attract business. I mean, we have to attract commerce. We have to attract mainland companies come here and do their thing. And that includes manufacturing, by the way. Okay. We're out of time. Tom, I hope you come back in a week or two. We can explore more of the bills on your spreadsheet and see which ones are still standing and which ones are threatening. Thanks to you. Always a pleasure. Thanks, Tom. Yeah. I'm a chica.