February 4, 2009

The debate over the GET surcharge

Filed under: Hawaii State Politics,Honolulu Politics — Doug @ 7:36 pm

Mayor Hannemann and State leaders are engaged in a struggle about a possible change that would see the State receive the proceeds of the 0.5% Honolulu County GET surcharge. David Shapiro has an interesting column and a blog posting on the topic.

The transit tax was levied by the City Council, not the Legislature, and the money belongs to the city.

Can the state legally transfer a city tax raised for a dedicated purpose to the state general fund for another purpose? The state Supreme Court struck down the Legislature’s transfer of insurance assessments to the general fund.

Legally? I’d say “yes.” This would be quite a different matter from the insurance and E-911 moneys being moved to the general fund. For starters, the GET (including the surcharge) is already state money and sits in the general fund until the surcharge is disbursed quarterly to the County. It is only after the State hands over (some) of the surcharge that the “dedicated purpose” is specified, and the law only says that the County has to use the surcharge funds for a specified purpose. So, it would appear to (non-lawyer) me that if the County didn’t receive any of the surcharge, that point would be moot. Furthermore, the equal protection claims described in the recent HSC ruling don’t appear applicable to a GET surcharge levied across the entire Honolulu County economy.

The bigger issue is fairness. If a tax paid by O’ahu residents only is siphoned by the state, Oahuans would effectively be taxed at a rate of 4.5 percent for the same state services that residents of other counties get for a tax rate of 4 percent.

Talk about inviting a tax-discrimination lawsuit by unhappy O’ahu taxpayers — not to mention a political backlash against O’ahu lawmakers who let their constituents bear a disproportionate burden in balancing the state budget.

On the other hand, neighbor island voters (and legislators) would quietly smile. The question then becomes one of if there would be enough neighbor island legislators and (revenue-desperate) Oahu legislators to make a majority. Remember, many districts of Oahu did not vote for the transit question on the November ballot, so the “political backlash” calculus is not as straightforward as Shapiro may think. When it comes right down to it, the Oahu taxpayers would not see any overt immediate difference; the GET on Oahu would not change, and the non-existent rail system would remain non-existent.

The comments at the column and blog post are also worth a look, which is where readers and Shapiro speculate that a “temporary” GET increase will be applied statewide. All legislators would need is a bill with a usable title… Oh, wait, that’s a bill sponsored by a few House Republicans and dissident Democrats? Even better. Heh.

Were the State to “withhold” the Honolulu GET surcharge instead of a enacting statewide GET increase, then I would not be entirely surprised if the the Honolulu Council were to threaten to repeal its surcharge in retaliation. That would seriously raise the ante in this spat, though, and (since the Council would need approval from the Lege to ever re-instate a GET surcharge) I don’t think the County would be so bold.


  1. Who ARE these people? Our public officials need serious help if they think Oahu taxpayers will voluntarily allow themselves to be discriminated against by paying a higher GET rate to subsidize the State General Fund. “Rational basis,” indeed!

    Comment by ccc — February 4, 2009 @ 9:06 pm

  2. If this passes, it won’t be the first time one group subsidizes government services to others. Even as we speak, the Wireless Enhanced 911 Board has been using the $0.66/mo surcharge on cell phone users to operate and upgrade equipment at 911 call centers even though cell phone calls to those centers account for only 60% of the total call volume. Landline callers who comprise the other 40% pay nothing into the surcharge fund but get the benefit of the system operation and upgrades. It will only get worse if, as the Gov proposes, $9 million, or nearly one-third of the funds presently held, is transferred to the general fund. The House deferred that bill today (2/5, Thurs.) but there are other vehicles to accomplish this mischief . . . .

    Comment by Ted — February 5, 2009 @ 2:12 pm

  3. Did anyone challenge the 911 charge mentioned in Ted’s post (presumably, in the PUC proceedings that imposed it)? Sometimes this sort of thing slips through not because it is legal, but because nobody came forward at the appropriate time to argue that it WASN’T legal. A discriminatory tax would be an open invitation to a civil rights action, without the restrictive procedural rules that might protect a rate approved by the PUC.

    Comment by ccc — February 5, 2009 @ 5:08 pm

  4. Unlike rate regulation of landline service providers (Hawiian Telcom) by the PUC, regulation of cell phone rates is preempted by federal law so the PUC has played no role in establishing this surcharge or managing its expenditure. It is solely the creation of the legislature and was originally imposed only for the purpose of getting wireless enhanced 911 up and running. That’s OK, but it is now up and running and the counties are instead resorting to that fund to, for example, pay their 911 call center’s phone bills (about $500,000 annually to Hawaiian Telcom from HPD alone). In other words, it is no longer about establishing wireless enhanced 911 capability, it’s about paying for the ongoing cost of providing that functionality AND underwriting the expenses of 911 call center operations imposed by the handling of calls from landline callers who do not pay the monthly surcharge. These funds were meant to supplement NOT supplant county funds spent up until now on this traditional public safety function. None of this is authorized by the current legislation.

    One of the truly remarkable things about this is that it has all been done under the nose of the Wireless Enhanced 911 Board’s attorney, a deputy attorney general who also happens to be THE AG’s wife. While I do believe that attorneys should be facilitating accomplishment of the client’s goals, not obstructing them, her non-action in this case has me mystified. Interestingly, the Board may be trying to address this problem by proposing a major power grab in a Governor’s package bill (HB 1014 / SB 832). The bill would create an uber-Enhanced 911 Board that would have the power to assess the surcharge against any communications service provider thru which one can reach a 911 call center (cell phone, landline, VoIP, etc.), spend those funds to improve, operate, etc. 911 call centers across the board (pun intended), and basically take over 911 infrastructure planning and funding.

    Beyond being a power grab, it also may permit triple dipping by Hawaiian Telcom: (1) they already get $0.27/mo per landline for their cost to provide enhanced 911 service to those customers; (2) they would be eligible for reimbursement from the enhanced 911 fund into which is paid the existing $0.66/mo. surcharge, which landline users would now also have to pay, for reimbursement of enhanced 911 service costs; and (3) their bills to the 911 call centers are being paid from the surcharge fund. “Pull up to the hog trough, boys, the slop’s on us (the consumer).”

    Legislation that makes other communication service users share the burden of funding 911 call center operations may seem fair. But it also is an admission that the $23 million now sitting in the fund that has been paid exclusively by cell phone users but expended for EVERYONE’s benefit has been discriminatorily collected and expended. Although the House Public Safety Committee also dferred this bill on Thurs. (2/5), I see lawsuit v.v. the one brought by the Hawaii Insurer’s Council regarding the fees levied on insurance company that were later siphoned off to the general fund. Because of my current employment, I can’t pursue it but I’d love to see someone do so. Hint. Hint. Hint.

    Comment by Ted — February 6, 2009 @ 11:09 am

  5. Enhanced 911 update: decision-making on the Gov’s bill discussed in post #4 will be held by House PBS on Mon., 2/9 @ 3:30.

    The thot plickens.

    Comment by Ted — February 6, 2009 @ 7:15 pm

  6. Legally (trust me) the state would have to first rescind the existing law and then raise the GET in order to get the transit money. Do you think they are willing to raise taxes right now? They cannot, I repeat cannot, merely shift the revenues to another source.

    DOUG: Heh. Says you. The source is not shifting, the revenue source is was and would remain the GET. What is shifting is the destination, i.e. the City would not get any of it.

    Comment by Hodad — February 6, 2009 @ 10:10 pm

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