Hawaii lawmakers will have to wait an extra year to get advice on the state’s tax structure.

The Hawaii Tax Review Commission, which is convened every five years, will seek an extension to its statutory reporting deadline, its chairman Randy Iwase told Civil Beat. The delay would put the report two years behind schedule at a time when lawmakers are scouring options to scrape up new revenue.

By law, the commission is responsible for analyzing the state’s tax structure and ensuring taxpayers pay their fair share. The statute requires an evaluation and recommendations “30 days prior to the convening of the second regular session of the legislature after the members of the commission have been appointed.”

The commission last came together in 2005 and presented its comprehensive report prior to the 2007 legislative session. Technically, the group should have come together last year, but former Gov. Linda Lingle only named two members. Gov. Neil Abercrombie named a third person this year, who was confirmed by the Senate in May, and four interim appointments as recently as June. The four interim members still need to be confirmed by the Senate next year.

“Because four of us were appointed in the latter half of this year, with a report due in December, there’s absolutely no way we can do that,” Iwase said. “We’ll ask that it be extended to (December) 2012.” He said that request will require drafting legislation.

Old Report Cited Often by Lawmakers

During this year’s legislative session, lawmakers approved about $600 million in new tax revenue to help fund an $11 billion operating budget.

The previous commission’s report, which was issued in December 2006, was cited by lawmakers, testifiers and state officials for tax-related bills during the session. For example, the Department of Taxation used the old study when estimating revenue figures for eliminating General Excise Tax exemptions, even though it was outdated.

The chairman of the Senate Committee on Ways and Means referred to the commission when he rejected the governor’s proposal to tax pension income, saying it was a policy call and its full effects should be studied.

The budget lawmakers approved in May includes $200,000 for this year’s Tax Review Commission. Most of the 2005 budget was used to hire consultants for studies, according to former commission members.

Iwase said the commission expects to secure a consultant by December to do an initial study. But the group is still deciding what that study should entail.

“Because of all the time constraints, our first order of business as I see it is to get the solicitation out as early as possible,” Iwase said. “We’re working on the language for the scope of the study, a timeline to select a consultant, a timeline to have it submitted to us … We’re mulling over now what we would want the consultant to look at.”

‘A 21st Century Tax Code for Hawaii’

He said additional studies might be done, but that the commission is working with a limited budget and doesn’t have dedicated staff from the Tax Department.

Asked about some topics the commission could explore, he said the members are “still mulling that over.”

“I, personally, would like to look at having a 21st century tax structure for Hawaii,” he said. “With the Internet and evolving technology and the changing nature of taxable interactions, I’d like to see if our tax system is adequate and if we need to make recommendations for change.”

While the proposal to tax pension income was a hot-button issue this year, Iwase said it hasn’t become a priority yet for the group.

“I suspect that the issues relating to pension and other kinds of taxes or the repeal of exemptions will have to be dealt with by the Legislature without our recommendation because we’ll still be in the process of looking at the tax structure,” Iwase said.

The group will next meet on Sept. 29.

About the Author