Baybars Karacaovali

The commission reviewed reports on the hiring of consultants for tax competitiveness studies and discussed the potential for a tax study regarding tourism and housing affordability. A motion was approved to proceed with a request for professional services related to the tourism topic. Additionally, the commission deliberated on federal and state tax policies concerning affordable housing production and cost-effectiveness, and set the schedule for the subsequent meeting.

The commission held a discussion regarding the procurement of professional services to hire consultants for a tax review project. The evaluation committee presented plans to follow a professional services procurement method to identify opportunities to improve Hawaii's tax system, specifically focusing on economic growth, income growth, and the strategic value of existing tax credits. The members also discussed the potential involvement of the University of Hawaii Economic Research Organization (UHERO) for future research tasks.

The Commission discussed several key tax policy issues, including the role of consultants for upcoming reports, a review of historical tax presentations, and the evaluation of Hawaii's tax system. The discussion covered topics such as tax revenue volatility, the broad nature of the general excise tax compared to other states, the impact of Hawaii's flat income growth relative to rising expenses, and the use of tax credits. The group also examined the regressivity of tax policies and debated the efficacy of targeted exemptions and credits for low-income populations.

The commission discussed the strategy for hiring consultants for upcoming projects, including the possibility of issuing requests for services across different topics such as tax competitiveness, the impact of transient accommodation tax rate increases, and tax credits and exemptions. The members evaluated the potential to solicit bids for one or more projects and addressed concerns regarding the scope and relevance of certain proposed studies, such as climate change resiliency and tax increment financing for housing affordability. Additionally, the commission considered the benefits of having multiple vendors for separate project components to increase efficiency.

This document outlines Project Topic 1: Competitiveness for the Tax Review Commission 2025-2027, aimed at enhancing Hawaii's tax system competitiveness while preserving current revenue collections. Key focus areas include an empirical analysis of Hawaii's tax code against other states to support economic and per capita income growth, identification of effective tax policies and those limiting growth, and a thorough analysis of specific tax credits and incentives (e.g., low-income housing, opportunity zone, Hawaii Film Credit). The plan seeks to develop proposals for better resource deployment, create a framework for evaluating existing and proposed tax credits, and inform corrective actions to ensure measurable economic value and alignment with Hawaii's policy goals, particularly regarding affordability, workforce stability, and housing production, all while considering fiscal stability and administrative resources.