In the coming days of the Legislature, nobody expects anything but confirmation for the interim appointment of Linda Chu Takayama as director of the state Department of Taxation. The Senate Ways and Means Committee certainly seems inclined, based on the committee report on file and the testimony in favor.
What’s cited is less that she’s a particular tax expert — though her law degree and experience in economic development and commerce positions for the city and state are relevant — than that she’s got broad experience in problem-solving and administration overall. She served as state insurance commissioner under Gov. John Waihee in the wake of Hurricane Iniki, without having a background in insurance.
“I never had a job I knew anything about when I went into it,” Takayama said, not at all apologetically.
It’s hit-the-ground-running time now at DoTAX, though. The agency has come under fire for problems with its Tax System Modernization project, a major priority of Gov. David Ige, who called her in from her previous post one floor up, heading the Department of Labor.
“One of the jokes is the reason I was made director of taxation is because I was the closest one,” she said.
Takayama graduated from the University of Hawaii in journalism. Her husband, state Rep. Gregg Takayama, also was a journalist before becoming press secretary to U.S. Sen. Daniel Inouye; they have three grown daughters.
During 13 years in D.C., she worked for Senate Sergeant-at-Arms Henry Giugni but also had a job with Grocery Manufacturers of America. And in that post she’s proudest of salvaging what had been wasted food and directing it to the nation’s food banks; Takayama now chairs the Hawaii Foodbank.
With all of that experience, she demurs at disclosing her age; only her hairdresser, Paul Brown, knows for sure.
“I’m way older than I look,” she said. “Paul claimed it’s because of my Korean genes.”
QUESTION: What is the current status of Tax System Modernization?
ANSWER: The contract with the former independent verification and validation (IV&V) consultant, Advan Tech, was terminated by mutual agreement when I arrived in December. Procedures are underway to conduct an RFP for a new contract, which will be assigned to the Office of Enterprise Technology Services. Under normal circumstances the monitoring consultant should not be reporting to the entity being monitored.
Q: Has the conflict over management of the project, involving staff and assigned IT officials, resolved?
A:Tax System Modernization (TSM) was a total overhaul of antiquated data systems that were shaky, slow and unreliable. If the Tax Department, affectionately known as DoTAX, was to be the revenue engine of the state, it had to be in better shape.
There were fits and starts in the beginning and in an attempt to promote some efficiencies, the structure of the project management team was shifted around last year, but ended up being awkward and confusing instead.
When I came on board, we returned to a more typical configuration, wholly contained within the department under one director, me and one project manager, Rona Suzuki. It’s a more vertical hierarchy, but it’s now clear there is a specific decision-maker, a single project manager, and a unified path forward.
We are encouraging the notion that the project is, and must be, a collaboration that requires everyone’s input and effort to succeed. Hopefully, the staff recognize this as a golden opportunity to learn the latest techniques and mechanics while working side by side with the vendor.
Q: Regarding the whole debate over Airbnb and other brokers collecting taxes from vacation rentals: Do you think the department can help the county with its zoning enforcement issues?
A: The department’s authority and expertise is in collecting taxes. Zoning enforcement is the purview of the counties. We’d like to stay on our own side of the fence. However, we also want to be as helpful as possible to the needs of the counties and are working with the attorney general to craft a solution for all.
The difficulty arises from federal laws that restrict the state from requiring a publisher like Airbnb from being responsible for what the rental owners do or advertise, including the taxes they owe or the land use requirements that apply.
Various approaches are currently under consideration by the Legislature.
Q: The governor mentioned the goal of cracking down on tax cheats. How is the department going about doing that?
A: The great majority of businesses and individuals pay their taxes voluntarily. It’s not fair when others don’t. The cheaters come in a number of shapes and sizes, so we have different programs to catch each kind. There are the identity-theft scammers who use an individual’s name and Social Security number to file a false return and ask for the refund to go to their own account or address.
Screening for these scams take a little time, which causes refunds to be delayed. Other investigators and auditors target those businesses or residents who never file or who report less than they should. This includes criminal activity, questionable deductions, work for pay that is “off the books,” etc.
The department also cooperates with the Internal Revenue Service, which notifies the state when they catch a federal tax cheater, in case the person might also be cheating state-side.
Q: What are the department’s funding priorities this session?
A: Here at DoTAX, our No. 1 request is for $16.5 million to complete the TSM project. So far, the phases or rollouts have included the GET, TAT, corporate income tax and a few others. That’s about 60 percent of the project done.
Next up is the all-important individual income tax phase scheduled for November.
Q:Are there other changes in law or policy that the administration hopes to pursue?
A: Aside from funding, our biggest issue in the Legislature will be tax reform. Lawmakers will have to decide which, if any, of the major changes Congress enacted will be adopted in Hawaii.
Will the mortgage deduction be capped? Can state and local taxes still be deducted? Will tax rates go up or down? The hearings have already started at the (state) Capitol. This is one issue that is sure to impact everyone’s pocketbook. Too early to tell, but most analysts think it will be positive.
Q: Looking back: How was your experience as insurance commissioner?
A:I went in, and very similar to here, the place was kind of a mess … there were some really high rate increases. I went in and within a month or two, I was testifying in front of the Legislature on major reforms, starting with auto insurance.
Then I eventually went through property insurance; remember (Hurricane) Iniki? That was me — basically the whole property casualty insurance industry here collapsed. Nobody could get insurance, do you remember that? One insurance company actually took down their sign so nobody could find them.
So I created the Hawaii Hurricane Relief Fund. That was me, invented that. And believe me, there were plenty of folks out there who were, “Little girl, you don’t know anything about this sort of thing. Leave it to us, you should just let all of these companies go into insolvency. And I thought, I can’t do that. What would that do to our state? …
At the time I was working for Gov. (John) Waihee. … He saw immediately what the issue was, and how it could be resolved, more so than actually any of the insurance people around me. And he goes, “Oh, this isn’t an insurance problem, it’s a mortgage problem.” Yes.
And I said, “The only thing, Gov, is it only works if there’s no hurricane.” He said, “Don’t worry, there won’t be a hurricane.” And God bless him, there wasn’t. …
I actually did find out at that period of time, when there’s an emergency, no one else knows what to do, they will let you do anything you want.
Q:Do you think it helps with out-of-the-box thinking that you weren’t from the insurance field?
A:I really believe that. Seeing things with new eyes, not being burdened by the way things are supposed to be. And I’m always working with folks who try to put you back in the box.
