Relating To General Excise Tax.
The proposed exemptions could potentially reshape the fiscal landscape in Hawaii by removing significant revenue sources from the general fund. The legislature highlights that Hawaii is one of the few states that tax medical services and is the only state taxing Medicare services. This bill, by removing taxes from these services, could encourage healthcare professionals to practice in Hawaii, thereby addressing the existing healthcare professional shortage and potentially reducing healthcare costs for residents. The projected state tax surplus of $2.6 billion, with further surpluses anticipated, suggests that the state could afford these changes without immediate adverse fiscal impacts.
House Bill 1699 aims to amend the general excise tax in Hawaii by creating exemptions for food and medical services. The bill is motivated by the high cost of living in Hawaii, which is reported to have the highest in the nation. According to the legislature, the general excise tax has a significant impact on the final prices of goods and services. By exempting food and medical services from this tax, the bill seeks to alleviate some of the financial pressure on households, especially regarding food expenses, which are substantially higher than the national average. For a typical family spending on food, this could translate into savings of over $687 annually if food were fully exempt from the general excise tax.
However, the legislation is not without its controversies. Opponents may argue that exempting food and medical services from the general excise tax could lead to a significant decrease in state revenue, affecting funding for public services and programs. Moreover, the bill's reliance on the current fiscal surplus raises questions about long-term revenue sustainability. Critics may express concerns regarding how these exemptions could disproportionately benefit certain groups over others and whether they are the best approach to address the cost of living issues facing Hawaii residents.