HILO — For the second time in two years, the new year will bring another increase to the county’s general excise tax.
Starting on Jan. 1, the county GET surcharge will increase from 0.25% to 0.50% and will be extended until the end of 2030.
The county surcharge is in addition to the state’s existing 4% GET tax rate, bringing the total tax rate to 4.712%, up from the current rate of 4.4386%.
The county surcharge currently brings in about $25 million to county funds, and is estimated to double that amount to $50 million when it increases next week.
Mayor Harry Kim said the extra funds will be spent on transportation infrastructure such as roads and mass transit, although he hopes the use of the money will be expanded in the future.
“There’s a law that requires the GET to be spent on transportation,” Kim said. “We were trying to get flexibility on that law this year, but we weren’t able to. I’m hoping we’ll try again next year to get more flexibility.”
If that flexibility is won at the state legislative level, Kim said the additional revenues will be able to used for all manner of county general funds and expenses, although he added that such a change could only take effect in July at the absolute earliest.
The Hawaii County Council approved the surcharge increase in March, only about two weeks before a state deadline to pass such a hike. That council decision was acrimonious, and faced significant public opposition.
Council members in support of the increase noted that the county has little control over its current spending — an estimated 75% of its $518 million annual spending goes to payroll and other benefits for county employees.
“One of the reasons we are in this position with our budget is how much money is committed to the employees of the county. … We’re taking care of the constituents who work for the county,” said Kona Councilwoman Rebecca Villegas in March. “It’s ironic. … We’re not spending money far afield.”
However, most public testimony about the increase this year was negative. Testifiers were skeptical that the increased cost of living they would face as a result of the increase would demonstrably improve their quality of life.
The tax is charged on nearly all products on the island, save for federal food assistance programs, prescription drugs and prosthetic devices.
The county surcharge imposes taxes on the state tax itself — which imposes a four-cent tax on every dollar spent on eligible products — and would increase the cost of a $100 grocery purchase by 52 cents, for a total of $104.52, counting the state tax.
A household that spends $20,000 annually on eligible expenses will spend about $100 on the additional county surcharge.
Email Michael Brestovansky at mbrestovansky@hawaiitribune-herald.com.