Friday, February 2, 2001
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Posted on: Friday, February 2, 2001

Bid to abolish tax on food fails in House

By Lynda Arakawa
Advertiser Capitol Bureau

The Hawaii Republicans’ proposals to eliminate the general excise tax on food, medical services and rent got off to a grim start yesterday.

The House Economic Development and Business Concerns Committee decided by a 9-3 vote not to pass two bills that would eliminate the 4 percent excise tax on groceries, medical services and rent.

Committee members Rep. Bertha Leong, R-16th (üina Haina, Hawaii Kai), Rep. Barbara Marumoto, R-17th (Kahala, Waialae Iki), and Rep. Guy Ontai, R-39th (Wheeler, Mililani), voted not to hold the bills.

The committee also deferred decision-making on a bill that would abolish the general excise tax only on groceries, but Committee Chairwoman Lei Ahu Isa said she doesn’t want to pass that measure.

House Republicans want to abolish the 4 percent excise tax on food and medical services this year, and on rent a year later.

Ahu Isa, D-27th (Puunui, ülewa Heights, Nuuanu), said the state cannot afford such proposals when lawmakers are looking for ways to help pay got teachers’ pay raises.

"The food exemption, it sounds good, but it’s not really when you look at the numbers," she said. "They’re eroding our whole (excise tax) base."

Instead, she wants to look at a tax credit targed at those who need help, such as low-income families and single parents. She also said she would rather further reduce the personal income tax rate.

Ahu Isa is among the 41 House members who supported eliminating the excise tax on food and rent in a recent Advertiser Legislative survey.

Yesterday she said: "I didn’t mean to say I would totally approve all that. That would have been in an ideal situation."

House Minority Leader Galen Fox, R-21st (Waikiki, Ala Wai), who testified yesterday in support of eliminating the excise tax on food, said the Republican caucus may decide to pull the bill onto the floor if it doesn’t advance.

Fox said tax credits would only help those who pay taxes, so most retirees and those too poor to pay taxes would not benefit.

State Tax Director Marie Okamura said tax credits were a better way to help those who need relief the most. Retirees, low-income residents and others file only to take advantage of tax credits, she said.

The state Tax Department, the state Budget and Finance Department and the Tax Foundation of Hawaii opposed the bills, saying the measures would cause a substantial revenue loss.

Okamura estimated the total revenue loss from eliminating the general excise tax on food, rent and health care at $273.8 million. Eliminating the general excise tax on food would cost the state about $132.9 million, she said.

The Tax Foundation of Hawaii also said reducing the general excise tax rate and re-establishing a general excise tax credit would be more effective.

The Chamber of Commerce of Hawaii and Bette Tatum, state director of the National Federation of Independent Business, supported the measures.

People who don’t live here "are always so surprised to learn that a state actually taxes home consumption food, residential rent, and health care services — all basic human needs," Tatum said. "Hawaii has always prided itself on being for the little guy, yet it’s the little guy these unfair taxes hurt the most. · It’s absolutely headshaking."

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