 But we're back. This is Think Tech, Hawking Tax with Tom. I don't know what we do without you, Tom. That's Tom Yamachika. He's the president of Tax Foundation of Hawaii. I'm Jay Fidel. We're going to talk some tax with Tom. We just came back from crossover, and now's the time to look around and see what bills are still standing, and that is why we're calling this tax bills left standing after the crossover. That's a reasonable logical step, don't you think? I guess so. So what comes to mind at first, and you told me about this a minute ago, is that it's a bill that actually deals with the president of the United States that's still standing. What is that bill? Okay, so there are some people who are upset that President Trump has not disclosed his tax returns while other Presidents of the United States have. So the bill basically says, if you don't disclose your tax returns, and you're a candidate for president of the U.S. or VP, we will not put you on our ballot, and even if you win somehow, our electors won't vote for you. Wow, even when the convention, you become the candidate. Yeah, yeah. Oh, oh. That's the Electoral College. That's pretty draconian, but interesting. The problem, I think, comes to my mind, I'm sure you have some issues here with this bill too, is does he have any obligation to file tax returns here in Hawaii, Nate? No. Oh. So we are trying to affect his conduct on a national basis. Yes, we are. And we want to have those tax returns posted for all to see, not just those in Hawaii, but the entire world. Okay. Can I name him, or is it all candidates who are running for president? All candidates for president and vice-president. Yeah, we wouldn't want to do special legislation. Of course not. Well, that's very interesting. Does that have a prayer of passing? Well, it's on its way to the governor. Oh, my goodness. Yeah. It's a Senate bill that came over to the House. It went to the House Judiciary Committee. It was an unamended, which means there is no chance left to go to conference committee or anything else. It is done. And if it passes, if it passes the full House, goes up to the fifth floor for the governor's signature or veto. Okay. Now, as you may suspect, there are problems with this. Yes. Because the Supreme Court has held that only the U.S. Constitution can provide qualifications for federal offices like congresspeople and senators and even the president. So I don't think there's a specific case that dealt with the president yet. There have been cases that dealt with the House of Representatives and the senators. And the Supreme Court basically said, look, the requirements are in the Constitution. You, the state, can't add to them. I still love the bill. Has it made national news? Have other states introduced the same bill? There are like half a dozen that have, yes. It's sort of interesting to see how it plays out. We stand to be the laughing stock of the nation if this passes. Either that or in a funny leadership position, one or the other. Well, okay. That's good sauce to begin with. Now, another one that is probably not going to happen is carbon tax. Where does that stand after the crossover? That is still alive. But as with a lot of things that happen when bills cross over, the effective date of the bill is way, way in the future. And the relevant amounts are blank. So... Effective, effective date. Effective, effective date and blank amounts. Yeah, it's not going to go anywhere. It's just a punt. No, it's very, very possible that amounts can be put in back to the bill and it can be passed in conference. Wow, that'll be interesting. That'll put us up front, too, won't it? Yeah, I mean, so far no state has passed a carbon tax. Cities have. But no state has passed a carbon tax. A lot of it's a devil is in the detail and we don't have the detail in this bill, right? Well, the detail we have so far is that the carbon tax is supposed to be instead of the fuel tax and the barrel tax. Now, fuel tax is, of course, on gasoline and other kinds of fuel. But the primary purpose of it is to get funds for the highway fund to basically measure road usage or pay for road usage. So there are exemptions such that if you don't use the fuel on the highways, you don't have to pay the tax. So the big potential losers for this are going to be farmers because they use the fuel and farm machinery and the electric companies because they burn bunker fuel. And they are not subject to fuel tax now, but they would be subject to carbon tax. What about the people who, I mean, this is based on mileage use, I guess. What about the people who have to commute a long distance every day and conjure distinction to the people who live across the street from their places of business? Well, depending on how the tax shakes out, the people with long communes may be better off because less of the burden is going to go on the fuel and more is going to go on to the non-combustion engine producers. Of the greenhouse gases like the electric company. But do you think the electric company is going to stand by and just absorb the tax? Not a chance. They'll pass it through. They'll pass it through. Well, we have a long way to go to use that kind of expression. We have a long way to go before we're going to get home on this one. I mean, even if somehow all the pookas are filled in and the conference committee puts it together as a real bill, you're going to have a big fight on signature, I think, on this one. And who knows what else. And implementing it is going to be hard, especially when it's supposed to displace the existing gasoline tax bills. There will be a long way off. One other questionable bill was the bill about favoring locally grown produce, which I think is a wonderful idea. And we need that, except that the bill may have constitutional issues because of the Commerce Clause. What's the status of that one? Well, it's still alive. When you look at the testimony behind the bill, it's full of support. Lots of letters of support. Darn, it's a good idea. We ought to do this, except we can't. We're a state. We're a state and the state in the Union. And we can't discriminate against interstate and local. When it comes to our marketplace. Sure, wish we could. Do you think, I mean, this is a question of creativity, I suppose. Is there a way we could do this without violating the Constitution? No. Short answer. Short answer, no. Okay, let's look at some of the others now. How about this one called Marketplace Facilitation? And that you told me beforehand was it's final. It's going to the governor for signature or likely to go to the governor. Right, so here's how that works. We have online marketplaces like Amazon Marketplace. Walmart has one. There are a few other big retail distribution chains. Retail distribution chains that have marketplace facilitation setups whereby a small seller, say somebody who sells dog food in Arizona, can have access to a national marketplace by going through these facilitators. And a company like Amazon, they'll take your orders, they'll take your money, and they'll transmit your orders to this seller who will then ship the product. They get paid by Amazon after they take their credit card. And everybody's happy. So this is an attempt to close a loophole. What's the loophole? The loophole is who gets to tax the little dog food store in Arizona? Arizona doesn't because it's making an export sale. And Hawaii. And if Hawaii can, who do they tax? There isn't enough connection with Hawaii to allow Hawaii to sort of nexus directly over the Arizona dog food seller. Even if you impose a $200 transaction or $100,000 requirement, you're not going to have that much in Hawaii sales, I would guess. So the bill says, all right, fine. What we're going to do is make the marketplace pay the tax as if it were the retailer. And then the dog food seller is going to sell to the marketplace as a wholesale sale. So they're still liable for the tax, but at the half percent rate. So in practical terms, nobody's going to go after it. So, okay, right now this dog food seller is not paying gross excise tax. Is Amazon paying gross excise tax on what it sells from the dog food seller on the mainland? Is there a gross excise tax of any kind being paid on this dog food? There wasn't before. Right now there's none. I'm not sure about right now because I was told this morning that Amazon changed the practice. But the rule used to be that if Amazon sold the dog food itself and fulfilled by Amazon, then it would pay the tax and it would charge the customer. But if it was fulfilling the order on behalf of somebody else who didn't have tax access with Hawaii, then they wouldn't charge the tax. Well, more and more you see that on Amazon. You know, it's really ambitious. And you see, A, the things that Amazon stocks itself. B, the things where Amazon tells you they're going to get it for you and send it to you. They're still obligated to fulfill. And I suppose that under the Supreme Court case and the statute so far, they pay the state gross excise tax on those two items. But the third one is different. This marketplace facilitator is different. Has it somehow managed to avoid a direct, rather an indirect sale through Amazon and has a direct sale to you? Is that what it is? Yeah. So the theory at least before was if Amazon is just acting as an agent on behalf of the Arizona seller, they don't have to pay tax on anything but their own income, which is like the commission that they make. And the Arizona seller would have to settle any tax dispute with Hawaii. But if they didn't have physical presence in Hawaii, there was none. So this is, this new, this closing the loophole is going to tax Amazon for the fellow with the dog food on the mainland. He used to be able to go directly to the buyer here. And thus both he and Amazon would avoid paying gross excise. Now this bill would fall on Amazon to pay the gross excise on the marketplace facilitator shipment. The Amazon is the marketplace facilitator. But the dog food shipper from the mainland. Right, right, right. Well, that sounds only fair. And it's appropriate to, you know, to close the loophole, isn't it? Yeah, it's certainly a paradigm shift. But I think after the Supreme Court's decision last year, you know, something like that was coming. Yeah, right. It's just a matter of tuning it up. Right. Yeah, because it's right now probably not covered, but it will be covered if this bill passes. And you said this bill was, quote, final, which means what? What does that mean to say this bill is final after the crossover? What happened was it was a Senate bill that went over to the House. It was referred to the House Finance Committee. House Finance Committee passed it unamended. Okay, so it doesn't need to go to conference? Nope. Does it need to go for a full vote of the House or the Senate now? For a full vote of the House and that's it. Yeah, but there's really no reason why it wouldn't pass. It's been committed already. All right. And it'll go then to the governor for signature. So this is a done deal, really. Pretty much. Yeah, and of course he would sign a bill that would enhance state revenue, wouldn't he? You would think so. You would think so. Okay, but you know what? We're not final. We're only halfway through the show. And we're going to take a minute off and come back and then we're going to go final on the show. There's just more to cover right after this break. Watch. Aloha and Mabuhay. 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, Mabuhay, and aloha. Aloha. I'm Wendy Lo, and I'm coming to you every other Tuesday at 2 o'clock live from Think Tech, Hawaii. And on our show, we talk about taking your health back. And what does that mean? It means mind, body, and soul. Anything you can do that makes your body healthier and happier is what we're going to be talking about. Whether it's spiritual health, mental health, fascia health, beautiful smile health, whatever it means. Let's take healthy back. Aloha. Oh, we got treats for you. We're back in the final innings of our show about talking. Tax with Tom, talking about what tax bills are left standing after the crossover. And during the break, he handed me this long spreadsheet with lots of notes on it. And he said, wherever there are notes, that's the ones we should talk about. That's why we're making this a six-hour show. Not yet. Oh, cheer up. We've got 15 minutes. So some of the ones that come to my mind just flashing on this is, hey, the tax boards are review are being changed. I thought it was archaic years ago. Is it less archaic now? No, it's just that nobody signs up to be one. Okay. So they can't get people on the boards and the boards can't function. It can't function for the lack of interest. Lack of a quorum, yeah. Okay, so what's the change then? And how will it affect us? Okay, so right now the boards are there to decide tax disputes. So if you have a problem with the state and you talk to them and disagree on the result, because they're going to say you owe more and you're going to say you owe less, then you can have a couple of ways to appeal. One is you go through the court system. Right to the tax court. Right. And second is you can take advantage of one of these boards. And there's one in every county right now? In theory. Again, I think only one of them is staffed. Okay, it's not a job you want anyway. Sounds boring. Anyway, so now we've got the tax review boards. And that's for every kind of tax. And you can elect to go there before you have to file an action, a tax appeal in the tax appeal court. Right. And is there one tax appeal court or one for the whole state? One for the whole state. Okay, that's good for uniformity. So, okay, it's not working the way it is. And they're making a single tax review board instead of having one for every county. Yeah, so they would have administrative hearing officers, similar to how it works for Department of Labor. They will have people who are hired and paid by the Department of Tax to serve as your hearing officer. Now, they wouldn't be auditors, at least at the same time. So, I'm not sure who they would be. Maybe they'd be attorneys. But they would hear and decide on your taxes view. And then you can decide whether you go to a real court or not. Yeah, well, my recollection is that the boards of review were really civilians. And some of them were just ordinary lay civilians. They weren't necessarily skilled in the area of tax. So, when you went to them, you could have a very sympathetic ear as taxpayer to taxpayer. And they might give you a break. But a lot of people, they didn't want to serve on those boards. So, now we're going to change this. But I think it sounds like it's going to be more professional, more experts on this new one, this new, what are you calling the new one, tax appeals review panel. And less likely you'll have a sympathetic ear. Am I right about that? Who knows? There's a method about this madness, you know. I mean, you've got to wonder when the hearing officers are employees of the department. Right, they're in conflict. They can't really rule against the department so well. Because the department needs the revenue. So, is this going to pass? Probably will. Any opposition? So, are you taking a position on it? No. And there is no discernible opposition. Okay, it'll probably pass. Okay, I can't say that I'm thrilled about that. I'm not thrilled with the fact that people have not been willing to serve. I'm not thrilled with the fact that the lay jury approach is being replaced by a bureaucratic approach. One of the problems is that, you know, if you were to serve on a board, like if I were to serve on a board, right, I would be considered an employee of the department for ethics purposes. So, I wouldn't be able to practice. Because most of my practice is before the department. Yup. You know, for the time that I'm on the board and for one year after. Yeah. Oh, that's a bad job. That's a bummer. Why would you ever want to do that? Well, I didn't want to feed my family. Or if I were retired, maybe I would consider it. The only person who might want to do that is somebody who didn't care about practicing in tax. Well, yeah, if they were, for example, in, you know, hired by just one company, like a controller or somebody like that. And I think there have been people like that. Or if you had a practice that was all federal, then you wouldn't care. I mean, I would care because most of my practice involves state law. Yeah. Okay. Well, let's, okay. Let's, can we move on to changes in the income tax and income tax deductions in the state of Hawaii? What's on the griddle here after the crossover? Okay, there's a bill that would change income tax rates. Okay. As introduced, it was basically there to lop off the lower brackets because, you know, people earning like $2,000 to $3,000 probably won't pay tax anyway. And it's not worth our while to chase them. Okay. But now the way the bill looks like all the amounts have been blanked out. So, so we don't know whether it's going to be a do the same thing or whether it's going to be a massive tax hike. That's refreshing, Tom. So we don't know until conference and conference, we really can't say anything at conference. It'll be a surprise. It'll be a big surprise. How dramatic. And then at the end of that, we might find out that... Who says tax is boring? No, it's not boring. No, not not true. It's certainly a conference because you could really be surprised on a bill like this. A lot of surprises. In fact, there's a fair chance we'll be surprised. Fill in the pukas, they'll say we need more money. Before you know it, you'll have a huge tax hike. You won't have any opportunity to comment on it. Yeah. And that's scary. And if the governor is motivated to try to increase revenues, he'll sign it. That's scary. And it's scary. Huge was the word you used. I thought, huge. Okay. So let's talk about gross excise tax. What can we expect on that? Is there a bill pending that would increase gross excise tax in the state? Yes, there is. There's a half percent ET hike. It was proposed by higher education or lower education. The HSC is backing it. The UHPA is backing it. It's interesting because it comes on the heels of that constitutional amendment fight that we had this past summer. On education. On education. Realistic. And the voters said, we don't want this. Or at least the ones that voted said that. The ballot measure itself was invalidated because it was too vague. Taxes never go down. But the reason why the HSTA in particular sought that ballot measure in the first place is because they were told that a GT increase would never pass. Okay. But now that the property tax measure has gone down, it went back to defy conventional wisdom and hey, let's get this GT increase passed. And they're finding some sympathetic error in the senators. So the senators heard it, passed it, now it's over to the House. I don't think people realize, but I'd like to take a moment with you and just review this one thing. It comes out of George Freitas, remember him? Yes, of course. His mission in life, he was the leader in the tax office. His mission in life was to have the gross excise tax applied to everything. Without any exemptions, exceptions, exclusions, everything. And he achieved that over his career. And we are unique in that way because other states may have a sales tax or something akin to a sales tax. And there are exceptions and exclusions and alike. We don't have exceptions. We usually have a lot of them. We used to have a lot of them? No, we still do. What, name one? There's no GE tax on stocks and bonds or capital gains. There's no tax on dividends. Okay, I'm talking about sales. I'm talking about you buy some pharmacy products and longs, you pay tax on that. That's exempt. Pharmacy products? Yeah, okay. If they're prescribed for your use. Oh, but non-prescribed? Yeah, I mean, if it's- Sharks off the shelf are not our subject to tax. How about food? Most food is taxable. Taxable. That differentiates us from other states where there are exemptions along those lines. So when you add 0.5 on already, you know, on 4.0712, whatever it is, now you're getting, you know, close to 5% already. It's more than it would be in another state. Because it is on every level of commerce and because there are so few exemptions and exceptions. Okay, so if you did a matrix on this, you would say, well, if you took the same rules and applied them in another state, it would actually be much more a percentage. I mean, what I mean is you have to compare it to other states and then you get the true rate and the true rate of how it affects people and the fact that it's regressive. I'm not a favor of- I'm not a big booster. Yeah, I think it's very regressive. Yeah, one of the problems that's often been cited with the GET is that it falls harder on poor people who need to buy more stuff, you know, relative to the income that they need. So by one estimation, you know, the poor people have to pay like 14% of their income in taxes. While richer people have to pay like, you know, maybe 8%. Yeah. So in New York state, for example, the sales taxes, it's really like 12% or something, I don't forget what it is. That's why you're not there anymore. That's why you're not there anymore. One of the reasons. But we at 5% are actually much closer to that 12% than we think we are because of the way it works, the way it affects people. And here they go, raising it yet again. Okay. We're trying to. You think it's going to work? It's a lot of bills. You know, and this is kind of like my historical observation. They start off in the Senate, they pass the Senate, they go over to the House, they get killed now. Why? Because House members are re-elected every two years. Not so for the Senate. Okay. So, you know, a House member who votes for such an increase will only have to wait for one year or so. Well, the public catches up with them. Right. Good. It's a brilliant system. Okay, I think we have time. There's reasons for it, man. Yeah. We have time for like one more, well, two more real quick. Energy. You know, they've been trying for three years or more to get the tax credit for renewables who also include a tax credit for storage of batteries. Battery backup systems, yeah. And that's still pending. This is like the third year running. What does it look like on that one? I think it's dead for this year. Why? It's such a good idea. It's so appropriate. I mean, the storage and batteries, they go hand in glove, like love and marriage. Well, I think if you build your battery system with the PV, then I think you have a good base to take it as part of the PV system. It's not clear. But it's not clear. And the question is, what if you get a battery by itself? Right. That's what we're talking about. Yeah. And, you know, there's no indication of why you would need one, whether it would be part of your renewable energy or not. And maybe that's the problem. Well, maybe the problem is that the state legislature, that the state government is not really committed to getting to 45%, you know, pursuant to the goal and target. I'm sorry, 100% by the year 2045. They'll jack up the fuel tax. Yeah. Or put in a carbon tax and jack that up. Well, it all sounds like, you know, there's not a big plan going on here. And we're not really going to move ahead on tax credits or renewables together with storage. And it's really too bad. You know, over three years, this has been languishing. And here we go. A lot of things have been languishing. Yeah. I mean, people keep trying and trying and trying on other things that have failed in years past. Where's the policy? Whereas, I mean, do we have a policy on energy as reflected in tax bills? No. Well, I mean, there's, it doesn't seem to be a centralized source of leadership. Okay. Well, we're out of time, but I'm going to ask you this. How does it look now? Is it too early for me to ask when we get to the end of the road on this, looking there now, trying to be there now? What kind of a legislature has this been successful? It's really, it's really too early to tell. Because a lot of what's happened so far is positioning and repositioning these bills. The real work's going to happen in conference. And we're not going to know the final contours of anything, especially if they keep blanking stuff out and making defective dates. We don't know what we're in for until the very end. Okay. Well, you and I have to continue to follow it and especially at the very end so we can make a quick look back at those conference committees and how these bills, other bills do in conference committee and what kinds of breathtaking surprises we had. The conference committee has always started meeting on the budget, so it started. Okay. That'll be what, we'll be out of the woods here, so to speak, in what, middle May? Early May is when they went to say to adjourn. So it was still in for a rough ride until then. Okay. Well, we have to keep talking, Tom. We do. It's great stuff. Thank you, Keeka, president of the Tax Foundation of Hawaii. Thank you very much, Harkin. Talk to you in the tax with me.