Gary S. Suganuma

The meeting was the first general fund forecast of 2026. Key discussion points included the review of revenues by the Department of Tax, noting that General Excise Tax (GET) collections were up 7.2% for the first five months of Fiscal Year 2026 compared to the prior year, while individual income tax collections were down 15.5%. The decline in individual income tax was attributed to the implementation of tax cuts from Act 46, including increased standard deductions and expanded tax brackets, which provided significant liability reductions, especially for lower and middle-income taxpayers. The discussion also addressed the impact of other legislation, such as the pass-through entity tax adback. Furthermore, the committee discussed the Transit Accommodations Tax (TAT), noting a slight overall increase but also the ongoing legal challenge regarding the imposition of TAT on cruise ships, which resulted in a temporary halt of enforcement for that component. The general fund collections for the first five months of Fiscal Year 2026 were down 10.5% overall, or 3.2% when adjusted for a one-time estate tax boost in the previous fiscal year. The current forecast trajectory indicated a projected negative growth of -4.6% for FY2026 if no further revenue materialized, which aligned with the council's existing forecast of -4.7%. Corporate income taxes were noted as being down by 16.4%, consistent with national trends of post-pandemic revenue slowdown.

The meeting addressed structuring the review of presentation materials from previous Tax Review Commissions to enhance efficiency. Key discussions included the General Excise Tax (GET) and Income Tax. The Commission reviewed recent legislative actions, specifically Act 46 (Individual Income Tax Cut) and Act 47 (GET Exemption for certain medical services), and Act 58 and Act 96 from the 2025 Legislature regarding Pass-through Entity Tax and Transient Accommodation Tax increases. Members discussed potential focus themes, including tax credits evaluation, statewide tax competitiveness, climate change resilience, and long-term healthcare financing. There was also preliminary discussion regarding the potential hiring of a consultant to update the 2015-2017 study on the Principles of Sound Tax Policy.

The initial meeting of the Tax Review Commission commenced with organizational formalities, including the presiding officer making opening remarks and confirming a quorum. The Director of the Department of Taxation welcomed the commissioners, congratulated them on their appointments, and outlined the commission's mandate to conduct a systematic review of Hawaii's tax structure based on equity, efficiency, and adequacy standards. Key discussion points involved reviewing legislative guidance provided through resolutions, specifically House Concurrent Resolution 182, which directed the commission to analyze federal tax rule impacts, visitor/non-resident tax obligations, tax credits/exemptions, revenue sources, and enforcement effectiveness. Another Senate resolution required exploring actionable funding mechanisms for the Hawaii Long-Term Care Financing Program, referencing Act 245 of 2002. The meeting also covered administrative compliance requirements under the Hawaii Sunshine Law, including rules on public interaction, agenda adherence, and the requirement for minutes or a recording.

The meeting commenced with a roll call to confirm a quorum. The initial action was the approval of the minutes from the previous meeting. Key discussion points included the Chair addressing their reaction to the nomination and confirming the use of first names during the proceedings. The commission then addressed public comment and testimony, noting the lack of written testimony but inviting live comments, which were not forthcoming. A significant portion of the meeting focused on reviewing past materials and presentations from previous tax review commissions to save time, including specific older studies on income tax and property tax, and a document titled "Principles of Sound Tax Policy for Hawaii." Finally, a presentation was given providing a general overview of Hawaii's tax system, noting that consumption-based taxes account for 61% of revenue, income taxes account for 35%, and wealth taxes make up the remainder, excluding county-level property taxes. The presentation detailed the General Excise and Use Tax (GET) structure, noting its 1935 adoption and unchanged rates since 1978, and highlighted that Hawaii's GET tax base as a share of personal income is unusually broad at 129%, largely due to tourism.

The agenda for this Third Meeting of the 2025-2027 Tax Review Commission includes preliminary items such as call to order, public notice, and quorum confirmation, followed by public comments. Key discussion points include a vote on the Minutes for the February 17, 2026 meeting, a report from the TRC Chair regarding the Principles of Sound Tax Policy Document and potential consultants, and a discussion of a GET Presentation from Dr. Seth Colby given to the previous commission in 2020. The agenda also features a brief informational presentation on Tax Credits by Dr. Baybars Karacaovali, details on the timeline and requirements for hiring consultants, a break, and introduction of potential focus themes. The meeting will conclude with discussions on Long-Term Care Financing in relation to legislative bills H.B. 1804/S.B. 2554, potential in-person meetings, the next meeting agenda, and scheduling.