HONOLULU (AP) — Hawaii would exempt groceries and medical
services from its general excise tax if bills advancing through the
Legislature become law.
Lawmakers heard a chorus of support
Thursday from policy analysts, poverty advocates and the food industry
for the proposal to stop taxing groceries.
It is not yet known
what such a cut would cost the state. The initial estimate is $200
million for fiscal 2015 and $490 million in subsequent years, said
Joshua Wisch, deputy director of the state Department of Taxation.
"The
one thing we do know is, it’s costing our residents, in particular our
low-income residents, a great deal," said Sen. Sam Slom, the chamber’s
lone Republican member, who represents Hawaii Kai and introduced the
proposal, Senate Bill 2169.
Kelii Akina, president of the
Grassroot Institute of Hawaii, told the Senate Committee on Human
Services that a family of four in Hawaii spends an average of $1,000 a
month on groceries. Cutting state taxes, he said, would save such a
family $450 a year.
Thirty-six states do not tax groceries, Lauren
Zirbel, the executive director of the Hawaii Food Industry Association,
testified. Seven of the remaining 14 impose lower tax rates than
Hawaii, she said.
In written testimony opposing the measure, the
Tax Foundation of Hawaii argued that an across-the-board cut to the
excise tax rate would save taxpayers money while avoiding the arduous
process of defining which food is eligible for the exemption.
The
committee also advanced SB 2206, which would establish an earned income
credit and cut tax liability for people who earn less than 125 percent
of the federal poverty guideline.
Hawaii’s high cost of living and
high poverty rate make such a measure necessary, Jenny Lee, an attorney
with the Hawaii Appleseed Center for Law and Economic Justice, told the
committee.
"It’s simply counterintuitive and inefficient policy
to tax households deeper into poverty and then have expensive social
services provided in order to try to alleviate the impact of poverty,"
she said.
The state would double the tax credits it offers to
renters who make less than $30,000 a year, under another bill the
committee advanced, SB 2835.
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Sam Eifling can be reached at http://twitter.com/sameifling .
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