Did David Ige vote for $800 million in new taxes?
That’s the claim being made in an ad from the Republican Governors Association.
The group is citing a report from Americans for Tax Reform that was released in 2012. The report was used to attack Democratic governors across the country for raising taxes. It claimed Gov. Neil Abercrombie raised taxes by $833 million.
Republicans are using that same number, occasionally rounding it to $800 million, in ads and campaign attacks on Ige. Ige wasn’t named in the report, but because he voted yes on these bills, he’s been cast as a tax-and-spend Democrat.
The report cites five separate bills, all from 2011. That was months after Abercrombie took office.
The GOP says Ige raised taxes, even though he pledged not to.
Ige counters by correctly pointing to the projected $1.2 billion shortfall left by the Lingle/Aiona administration and asserting that he had to raise taxes in order to fix the GOPs failure to manage the budget. We’ll leave that political back and forth to the campaigns.Instead, we’re going to look at the report. Our question is simple: Is the $833 million figure accurate?
The report focuses on five bills that make up that total. First, we’ll take a look at the three related to motor vehicles.
Senate Bill 1328 raised the flat-rate vehicle registration fee from $25 to $45. A look over testimony on the bills at the time shows estimates to be inconsistent. The state Department of Transportation ballparked the number at $34 million while a document from the House Committee on Transportation put it at $22.9 million, and a Civil Beat article cited in the report put that number at $20.6 million per year. ATR says that amounted to $61.8 million.
Senate Bill 1329 doubled the vehicle weight tax. ATR puts that number at $90 million. Hawaii DOT testimony put the estimated number at $34.5 million per year.
Both bills originally put all funds raised into state highways. Those provisions were stripped in each final committee, and all revenue went to the general fund. Ige was excused on each of those conferences, but voted for the final bills.
House Bill 1039 raised rental car fees from $2 to $7.50 for one year, then dropped them to $3 after June 30, 2012. The conference committee report puts that number at $60 million. ATR says that was $180 million.
All together, those three increases, according to ATR numbers, come to $331.8 million.
The ATR report cited in the Republican Governors Association attack ad also includes Senate Bill 754, which removed General Excise Tax exemptions for a long list of businesses. This bill, which expired after two years, required certain businesses that had been exempt now pay the normal rate of 4 percent.
The ATR report says this cost taxpayers $346 million. That number is consistent with Department of Taxation estimates the put the 4 percent rate at $161.7 million for FY 2012, and $185.1 million for FY 2013, totaling $346.8 million.
The largest single element was the estimated $200 million raised by removing the exemption that contractors previously had enjoyed when hiring subcontractors. But Mallory Fujitani of the Hawaii Department of Taxation says that estimate turned out to be lower.
“While the initial guess on the revenue estimate for the suspension of the subcontractor deduction was initially thought to be approximately $200m, I believe the Council on Revenues reduced the estimated revenue impact to $50m (FY12) and $70m (FY13),” she wrote in an email.
There was, in fact, a provision in the bill that required the contractors to fill out extra paperwork in order to get more accurate figures. But the bill didn’t add penalties for non-compliance, the Department of Taxation does not consider those numbers to be accurate. All we have to go by are the revised estimates.
Accounting for the difference, that brings the total estimated costs down by $80 million, so SB 754 actually accounted for about $266 million in tax increases, not $346 million.
The final figure in the ATR report comes from Senate Bill 570, which eliminated deductions for those in the top income brackets. The ATR report says that cost taxpayers $155.4 million.
This one is particularly complicated. Early versions of SB 570 taxed pension income, eliminated state tax deductions, as well as itemized deductions, and delayed the implementation of deduction increases scheduled to take effect that year.
The biggest fight in the bill concerned the taxation of pension income of over six figures, a provision that was only expected to raise $17 million. It was stripped in the final version of the bill.
Written testimony provided by the Department of Taxation detailed estimated costs of the other provisions in the bill. The deduction for state taxes was estimated at $17.9 million per year. Capping the total amount of deductions for top earners was estimated at $22.4 million per year. And a delay in the implementation of deductions and exemptions would raise $3.2 million, but only for two years. Department of Taxation estimates put the total cost at $123.2 million for three years.
We tried to check this one against state records, but the information was lacking. The tax department’s Fujitani said, “There is no firm number that can be determined based on your question. We would need to know how much the taxpayer could have claimed, but didn’t. Also, it would require us to calculate a second tax return for all taxpayers over a certain tax bracket. Finally, not all taxpayers stay within the same tax bracket, or have the same amount of deductions each year.”
Based on state estimates and data, the five measures in the report by Americans for Tax Reform and used in the Republican Governors Association ads resulted in total increases of $619.9 million — more than $200 million less than the $833.2 million cited in the ATR report.
The claim that Ige raised taxes by $800 million is Half True.
UPDATE: After further consideration, we changed this rating to Half True. The bottom line is while the ATR report exaggerates the numbers in ways that seem to be for political reasons, David Ige did support hundreds of millions of dollars in tax hikes in the time period the ad covers.