In the session’s closing days, state lawmakers are positioned to take a tough vote on a needed fix to a tax loophole, have stumbled on the path to a minimum-wage increase and need a not-so-gentle nudge to enact a vacation-rental tax system that includes enforcement.
Today, many bills either will go to Gov. David Ige for a signature — or go down in flames. Last Friday, as a whole raft of legislation moved to the floor, lawmakers discovered a problem with a sought-after increase in the state’s minimum wage.
The favored version of House Bill 1191 that the House had approved had set two separate minimum rates: one for employers who hire workers for 20 or more hours a week and thus are bound to provide health coverage, and a higher rate for employers of workers not health-covered.
An issue arose — regrettably, it wasn’t anticipated until time was running out — with the fact that this two-tiered system would leave the state’s Prepaid Health Care Act (PPHCA) subject to legal challenge. Under that act, “every employer who pays to a regular employee monthly wages in an amount of at least 86.67 times the minimum hourly wage … shall provide coverage.”
The state Department of Labor and Industrial Relations asserts that this language assumes a single minimum rate, and that trying to amend that part of PPHCA would endanger an exemption to federal wages-and-benefits requirements that allows the state health law to exist.
After the session closes on Thursday, lawmakers must consult with state officials on how to redraft this measure. Incremental increase in hourly wages is needed to enable workers to pay increasing costs.
One worthy measure, HB 1383, would decriminalize possession of three grams or less of marijuana. This makes sense, as part of an overall effort to refocus prosecution on serious crime and to reform the criminal justice system.
More significantly, the Legislature appears ready to approve Senate Bill 301, which would end the state tax deduction for dividends paid to real estate investment trusts, known as REITs.
This is encouraging. Lawmakers faced some withering opposition to this measure from REIT beneficiaries, but the fact remains that it siphons away tax revenues that should come to Hawaii, and that the state urgently needs.
REIT dividends are taxed as income, but for Hawaii, too often that means it’s tax revenue paid elsewhere. Hawaii has real estate with tax revenue potential that should not be sacrificed.
Among the biggest challenges for today’s voting marathon is the fate of the vacation-rental issue. SB 1292, which would allow online booking platforms such as Airbnb to collect taxes for the state, seems to have stalled, which might be the best outcome. That measure would impose no enforcement duty on the platforms.
Instead — and it’s a tall order — state Sen. Laura Thielen has rightly called for the passage of HB 419. This would require booking platforms to advertise only those transient vacation units (TVUs) with county approval. On Oahu that would be a precious few rentals, since the city quit issuing new permits in 1989.
But this would at least put pressure on the City Council to pass its own proposed regulatory scheme, now under consideration, to authorize additional permits. If the state wants its tax money from vacation rentals, the only responsible way of enabling that is to insist first that this sector of the visitor market come under strict controls.
The state needs revenue, but not if the trade-off is sacrificing the residential nature of Hawaii’s neighborhoods, which would be a net loss. Government is there to serve both visitors and residents — but not to let tourism erode the hometown spirit.
