SB1396 is an economic development measure that changes the state general excise tax structure for a defined period from January 1, 2018 through December 31, 2030. The amendment shown increases the applicable tax rate to 11 percent, with the excess above a 10 percent benchmark directed quarterly into the mass transit special fund. The bill also preserves the existing general fund treatment for the portion of revenues attributable to the 10 percent rate.
The amendment further adds a contingency tied to litigation over county surcharge deductions. If a court finds the State’s withholding of county surcharge revenues unlawful and awards money to a county with a population over 500,000, an amount equal to that award must be taken from the mass transit special fund deposits and treated as general fund realization for the State. In practical terms, the bill reallocates a portion of tax revenue between the general fund and transit-related funding, while also creating a backstop if the county surcharge funding mechanism is invalidated.
Impact
The bill would amend Hawaii tax law governing the general excise tax rates and the disposition of revenues collected under those rates. It increases the statutory rate for the covered period, directs incremental revenue above the 10 percent level to the mass transit special fund, and specifies how those funds are adjusted if county surcharge litigation results in a monetary award. The measure affects taxpayers, the State treasury, and the mass transit special fund, and it interacts with statutes governing county surcharge deductions and general fund realization.
Sentiment
The available voting history suggests broad support for the bill. It passed multiple Senate committees with 4-1 or 13-0 votes and later passed House and Senate conference with unanimous votes in the recorded conference actions. No committee transcript is available here, but the repeated amendments and strong vote margins indicate the bill was generally viewed favorably, likely because it supports transit funding and revenue planning within the economic development framework.
Contention
The main point of potential contention is the tax increase itself, since the bill raises the applicable rate above the prior benchmark and redirects revenue away from the general fund. Another possible issue is the contingency tied to county surcharge litigation, which could affect how much money ultimately reaches the mass transit special fund versus the general fund. Any disagreement would likely center on the balance between funding transit infrastructure, preserving state revenues, and the treatment of county surcharge-related awards.