On August 28, 2012, the Hawaii Tax Review Commission released its “Study of the Hawaii Tax System: Final Report” .  While most of its findings were bland, it recommended the more controversial action of raising the GET from 4% to 4.5%:

Increase the GET rate to 4.5 percent

Hawaii’s GET rate is among the lowest in the country for states with this sort of broad-based consumption tax. While Hawaii has not raised its rate in over 35 years, over half of the states have raised this rate since 2000 – in many cases multiple times. Given the need to restore structural balance, an incremental increase in the GET rate is the logical method to improve the long-term financial outlook. While the GET is considered regressive, other recommended changes would reduce some of that impact.

Legislators on both sides of the aisle voiced their vehement opposition to this proposal in the report.  Click here to read more.  While increasing the GET seems to be dead on arrival, other proposals made in the report may get a legislative boost:

• Make permanent Act 105 (2011),  which eliminated certain GET exemptions and deductions (i.e. for subcontracting and subleasing).
• Capping open ended tax credits such as the renewable energy and film tax credits with targeted grants and loan programs.
• Restoring the temporary increases on transient accommodation tax and rental cars, shifting the tax burden to tourists.
• Expand nexus.

These proposals build upon and tweak what has already passed the legislature and could provide added revenue and reduced tax expenditures with limited political backlash.

Of course, any Hawaii tax debate would not be complete without a discussion of gambling.  Not surprisingly, the report declined to endorse gambling as a source of added tax revenue.  Chinatown underground game rooms aside, Winner’z Zone has been operating “legal” casinos all over Honolulu for quite a while now.