A proposal to gradually remove the state’s tax on groceries has expired.
While House Bill 1611 would have reduced Hawai‘i's general excise tax on groceries and nonprescription drugs each year until removing it entirely in 2034, a House committee on Wednesday recommended that the bill be deferred, effectively killing the proposal.
At Wednesday’s hearing of the House Committee on Judiciary and Hawaiian Affairs, committee chair Rep. David Tarnas said he “can’t in good conscience move forward with a bill that might have a quarter-billion dollars in fiscal impact,” citing estimates mentioned previously in the hearing by fellow Rep. Elle Cochran.
Cochran had told the committee that her office had projected an annual revenue loss of up to $250 million, but added that this was merely a “guesstimation.”
State tax research officer Baybars Karacaovali told Aloha State Daily last week that, by 2034, revenue losses would reach more than $460 million, but that the first stage of the tax cutback — which would have reduced the GET from 4% to 3.5% in 2027 — would only lead to a reduction of about $17.4 million that first year.
However, no firm projection has yet been released, and possibly never will be. Eliza Watson, administrative rules specialist for the state Department of Taxation told the committee on Wednesday that a revenue impact statement was being prepared for the bill’s eventual appearance before the House Finance Committee; with the bill deferred, that hearing will likely not take place.
Tarnas said the Department of Taxation should work closely with lawmakers and the Hawai‘i Tax Foundation to better understand the proposal’s impacts. He said he was reluctant to defer the measure, and noted its wide popularity among individuals, organizations and state agencies alike.
Several people spoke in support of the bill Wednesday, touting its potential to save low-income families hundreds of dollars each year.
“It’s not important that we tax the struggling families on a basic necessity,” said Nate Hix, policy director for the Hawai‘i Public Health Institute. “We can move our tax structure to a different tax on something that’s much more progressive and not burdening the low-income families the most.”
HB1611 was not the only bill introduced this year that would remove the GET from certain essential purchases. Senate Bill 2935 would exempt groceries eligible for the Supplemental Nutrition Assistance Program from the GET — regardless of whether the groceries were purchased via SNAP — along with nonprescription drugs, medical supplies, feminine hygiene products and baby diapers.
A Wednesday hearing of the Senate Committee on Health and Human Services voted to recommend the bill’s passage, although no estimate about its potential revenue impact was discussed. The bill has been referred to the Senate Ways and Means Committee but no hearing date has yet been scheduled.
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