Representative Isaac Choy's Testimony
The authors fail to take into consideration the steps that the legislature can take to manage
these liabilities. For example, if you study the attached report titled,
Based on the June 30, 2012 Actuarial Valuation by Gabriel, Roeder, Smith &
the actuaries for the Hawaii State ERS, you will see that accrued pension liabilitiesstart trending downwards in 2021 and will eventually be zero. This is the result of the pensionreform legislation passed by the state legislature.This example of how the Hawaii State Legislature can mitigate government obligations can also
be applied to all of the other liabilities that are used in the study. It is important to note that itis the obligation of the state legislature to manage the expenditures of the state.
Currently, our tax system is evaluated by studying the elasticity of revenues to total personal
income. Simply put, when the taxpayers of Hawaii get a raise, the state gets a raise. Thismethod, although not perfect, is a good guide line, not only for testing the adequacy of the taxsystem, but also makes a good guide line for the amount of expenditures that should be made.For their hypothesis to be applied completely, the authors should define what are coregovernment services and what the related costs are, to justify the need to raise taxes. If theauthors had defined what additional core services are needed, then I believe, it would be
prudent to increase revenues. Without examining every expenditure and defining core services,it is very difficult to accept the need for raising revenues as proposed in this report.
Therefore, I do not agree to the conclusions in this report.
Comment on Study on Selected issues of Hawaii
General Excise Tax by William Fox:
I do not agree that the State of Hawaii is losing $145,000,000 in tax revenue for e commerceand catalog sales. If this amount was divided by 4%, it would amount to $3,625,000,000 in
sales.Dr. Fox's method of guessing the total of amount of e commerce nationally, and then trying to
allocate those lost sales to specific states, is not an accurate way of forecasting e commerce
sales in Hawaii.
Talking with other state tax administrators at a Federal Tax Administrators conference, their
experiences have been, they have been collecting an average of about ten percent of Dr. Fox's
Manoa — University - McCully- Moiliili
Hawaii State Capitol, Room 404 / Honolulu, HI 96813Phone: (808) 586-8475 / Fax: (808) 586-8479 / Email: repchovrWcapitol.hawaileov