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    Groundhog Day In The Hawaii Senate

    You may remember Groundhog Day, the 1993 film starring Bill Murray.  In it, Murray played a Pittsburgh TV weatherman who, during an assignment covering the annual Groundhog Day event in Punxsutawney, PA, found himself caught in a time loop, repeating the same day again and again.

    On February 28, I was in a hearing in the Senate money committee, testifying on a bill.  The bill sought to amend what those in the real estate industry know as “HARPTA,” a law that requires people who buy Hawaii real estate from a nonresident seller to withhold 5% of the gross purchase price and pay it over to the Department of Taxation, as a way of making sure that the seller’s capital gains tax gets paid.  The bill, SB 508, would raise the withholding rate from 5% to 9%.

    “This feels like Groundhog Day,” I said.  “It wasn’t that long ago that I was before this same committee testifying on a very similar bill on the very same tax provision, seeking to do the very same thing.”

    It was true.  On January 29th, the same Senate committee held a hearing on SB 2506, which also proposed to raise the HARPTA withholding rate from 5% to 9%.  At the conclusion of that day’s hearing, the Committee passed the bill out with some amendments; the bill is now in the House.

    “At that time, Senators,” I continued, “I said that the withholding rate in the bill was excessive because the capital gains tax rate for individuals is 7.25%, and for corporations it’s 4%.  Withholding isn’t a tax, it’s just a way of making sure that the tax gets paid.  So it’s valid only if the withholding amount is a reasonable estimate of the tax.  At that time the Committee agreed with me and passed the bill out with a withholding rate of 7.25%.”

    “But that was before we got the Governor’s Message telling us we have a $50 million hole we have to fill,” the Chair said.  (We discussed the Governor’s Message last week.)  “The Department of Taxation is saying this bill will generate $15.6 million for fiscal year 2019 and $4.6 million for each fiscal year thereafter.”  (Indeed, these revenue projections are memorialized in the committee report.)

    But wait a minute.  Withholding isn’t tax.  A huge revenue gain like that means either that (1) the withheld amount is being used to pay income tax that otherwise wouldn’t be paid, or (2) it’s being intercepted to pay other kinds of taxes, such as general excise and transient accommodations taxes on rental income that is coming from the property, that weren’t getting paid and were brought to light when the property got sold.  If the revenue gain goes up even when the withholding rate is higher than the income tax rate, it means the problem isn’t income tax; it’s the GET and TAT that aren’t being paid.

    If that’s the real problem, this bill isn’t the right solution.  The solution needs to focus on the GET and TAT, which need to be paid on an ongoing basis rather than caught by chance in the end when the property is sold.  So, how about imposing a withholding requirement on property managers or rental pool operators?  It may be a bit of extra paperwork, but it may be better than requiring the rest of us to pay higher and more burdensome taxes to make up for the scofflaws, the blissfully ignorant, and others who owe the GET and TAT but aren’t paying it.

    ThinTech: Business in Hawaii with Reg Baker

    Aloha and Welcome to this week’s Business in Hawaii with Reg Baker.

     Be prepared to be impressed!! This week on Business in Hawaii, I interviewed Shayne Greenland, Academy Principle at Campbell High School and two of his top students.  I was very impressed, and I know you will be too.  We talked about how James Campbell High School is preparing their students for success.  Whether it is going on the college, a trade school or a job, these Campbell High School students will be prepared. 

    Congrats to all at James Campbell and especially the very impressive students

    Making money Public Speaking

    Conference speaking and corporate training, quickly offers Makana Risser Chai, are just two income streams for speakers.” I’m sitting at a Speakers Association of Hawaii monthly meeting listening to Makana as she shares her stories of how she has created a rising trajectory in the public speaking space.

    Makana Risser Chai

    She has been a professional speaker for more than 30 years. From this deep base, she begins telling stories, while peppering her audience with multiple ways she has made money as a public speaker.

    In general, she suggests to leverage yourself, your wisdom, experience and knowledge. If you cooperate with others, through partnerships with other speakers or creating a virtual company with affiliates, or forming a group of consultants, you can succeed beyond your abilities working alone.

    However, should you like working alone, then she advises becoming an entrepreneur. For example, as a speaker entrepreneur, you might develop your own sponsors, put on public programs, organize your own conferences and create webinars. Last but not least, she suggests founding and leading a mastermind group on your chosen topic.

    To continue with Makana’s story…


    Makana Risser Chai has been a professional speaker for more than 30 years. She is a Certified Speaking Professional of the National Speakers Association, where she presented at national meetings 26 times. She founded a training company based in Silicon Valley, which had annual sales in excess of $1 million. She is a speaker, author, attorney, consultant, coach, humorist. Or, on Facebook.com/MakanaRisserChai


    For more stories, visit robertkinslow.com

    By The Way, Could We Have $50 Million More?

    Our Legislature is now in session, and one of the big functions of the money committees – the Senate Committee on Ways and Means and the House Committee on Finance – is to balance the state budget.  The Governor submits a budget to start with, the Council on Revenues weighs in with how much money the State is expected to take in tax collections, and then the committees get to work on adjusting the budget to make ends meet.

    In the middle of this process, sometimes a letter from the Governor arrives saying, “We need to make some adjustments to the budget we sent in.”

    If it’s a couple thousand or a couple hundred thousand, it shouldn’t be a problem.  The State has a budget of $14.4 billion, counting all means of financing, according to the FY19 Executive Supplemental Budget.

    But what about $50 million?

    On February 5, Governor Ige sent the Legislature Governor’s Message No. 7, or GM 7 for short.  Tucked away in that letter is a request for $48,978,602 for health premium payments to go to the Hawaii Employer-Union Health Benefits Trust Fund, or EUTF, which is the fund that provides for health care for state employees after they retire from government service.

    The letter explained that when the Governor’s staff were putting together the budget for 2019, they used an actuarial valuation from 2015 and some projections by the Department of Budget and Finance based on the amounts they were currently paying into the fund.  But then, in January 2018, an updated actuarial valuation report was issued.  This one evaluated the EUTF as of July 1, 2017.  That report contained an opinion of the annual required contributions that the State needed to make to dig EUTF out of its financial hole within 30 years.  Because of a law that is referenced in GM 7, namely HRS section 87A-42, the State is required to come up with the full amount of the annual required contribution.  Which happened to be $48,978,602 more than they previously put into the budget.

    Apparently, the Senate Ways and Means Committee was sufficiently perturbed that it scheduled a rare informational briefing to grill the Department of Budget and Finance and the Department of Taxation about GM 7, a smaller additional budget request called GM 8, and a “$33 million individual vacation rentals legislative proposal” that also was tucked into the State’s financial plan.

    The $33 million item, by the way, is expected revenue gain from the passage of an “AirBnB Bill,” the likes of which we have written about before.  Interestingly, the Governor was counting on revenue gains from that bill in order to make ends meet on his version of the budget despite vetoing a similar bill in 2016.

    The Ways and Means informational briefing is scheduled for February 28th at 10:00 AM, should be very interesting, but unfortunately won’t be done by our press deadline.

    The moral of this story is that large unfunded liability items are unpredictable.  If you have two 800-pound gorillas named ERS and EUTF in the bar, as we have written about before, you shouldn’t be surprised if one of them starts bouncing around once in a while and leaves some damage that needs to be addressed right away.  We must deal with the current damage, but the bigger question – something that will take vision and leadership to answer – is whether we can do something about the gorillas.

    ThinkTech: SBA Hawaii Offers Plenty!

    The SBA offers so much to small businesses in Hawaii. Learn about it by watching this weeks Business in Hawaii video.

    Jane Sawyer and Reg Baker have worked together supporting small businesses in Hawaii for almost 30 years.  As a result, SBA Hawaii has assisted thousands of small businesses and nurtured them to success.  Some of these small businesses have been recognized nationally as the best small businesses in the US.

    Watch and learn what the SBA can do for you and your small business to ensure success.

    Product Review: Leatherman Juice CS4 multi-tool

    Leatherman tools are synonymous with guys who, unlike travel writers, really work for a living. On a daily basis a carpenter or a painter can extract a Leatherman Wave from their belt and address just about any imaginable challenge.

    As an author I have my tablet, my laptop and my other ‘devices’, but as a travel writer I require additional tools when I’m on the road. No, not just a cork screw or a pocket knife. All kinds of issues come up when you’re in foreign lands and an every-day carry multi-tool with screw divers, scissors and the like is a blessing.

    At 3.5″ in length, it’s not too large and not too small. Here it’s side by side to my dad’s WWII era Inox pocketknife–the EDC of its day.

    Leatherman has created the “Juice” series of multi-tools that are made for guys like me, who generally dwell in an urban environment but may find themselves just about anywhere.

    The item I chose to review for this piece, the Juice CS4, is the second largest multi-tool in their line of pocket-sized offerings. (Essentially it’s a streamlined version of their Juice XE6). It has a few less functions than the XE6 and hence takes up less room in your pocket.

    At 3.5 inches in length it’s small enough and just skinny enough (.653 inches) to comfortably carry around without a sheath.

    It’s got 15 tools which include all the standard stuff you need for fixing or repairing needs that may pop up whether you’re in Fiji or Philly.

    The standard Mr. Fixit stuff includes needlenose pliers, regular pliers, hard-wire cutters, wire cutters, 420HC knife, spring-action scissors, awl, Phillips screwdriver, medium/large screwdriver, small screwdriver, extra-small screwdriver.

    Yes, you can even uncork wine bottles but not always easily.

    In addition, it has a few items that won’t be found in the more utilitarian Leatherman offerings but are welcomed if you’re camping in the Rockies or on a picnic in Marlborough, New Zealand. These include a saw, can opener, bottle opener and corkscrew with assist.

    So what else do I like about it?

    Fit and finish (granite gray color) are superb and aesthetically pleasing. It’s easy to hold—the ergonomics are excellent. Everything works splendidly. Well, most everything.

    Gorgeous fit and finish.

    The only item I wasn’t 100% happy with was the cork screw. It comes with an assist that allows you to use the rim of the bottle for leverage. Makes sense in theory but it’s a bit unwieldy in practice. I’m not sure if it’s the geometry of the function (keep in mind it’s a small tool) or that the “assist” doesn’t allow much purchase on the glass rim. You can leverage the cork out an inch or so using the assist but then it’s easier to use elbow grease, as the old timers say, and simply yank it out.

    However, this is not a deal breaker by any means. You’ll get your cork out in the end.

    Those pliers come in very handy and they work splendidly.

    Conclusion:

    This is a winner.

    It has enough functions to take care of most all your needs and is small enough to be practical. If you’re going to take a tool with you on a trip, the last thing you want is some bulbous multi-tool rocking around in your pants pocket and the CS4 passes that test with flying colors.

    Note that it’s not a heavy-duty tool, such as the Wave. As my friend David, a tradesman who uses the Wave daily, said, the Juice is a “gentleman’s” EDC tool rather than an industrial strength work tool.

    Handy to take camping or on the road, it easily fits in your pocket. I recommend it.

    That said, I have no reservation recommending the Leatherman Juice CS4 for travelers, campers or urban gentlemen/gentlewomen.

    Just remember that if you’re travelling by plane, not to bring it in your carry-on luggage. The TSA agent will confiscate it (because of the blades and corkscrew). Stow it in the suitcase so that it goes in the cargo department and our friends who maintain security at the airports will be happy.

    Leatherman has a 25 year guarantee, so you’ll be set for quite a while.

    Practicing Law in Hawaii

    Fascinating conversation with Matt Matsunaga and Tony Donnes about their firm and the practice of law in Hawaii. Great advice for those in their second or third year of law school.

    Tips for Professional Speakers

    Recently, I attended a professional speakers dinner & dialogue meeting in Honolulu. Fortunately for me, Annabel Chotzen was featured during the evening meal. She gave a wonderful talk on how to “Stand Up, Stand Out and Get Speaking Engagements.”

    Jeff Owens, the President of Speakers Association of Hawaii introduced Annabel, as the audience listened, scattered comfortably around the octagonal tea-styled platform suspended over koi laden water at the Floating Pagoda restaurant. Annabel’s style was friendly and accessible while offering valuable tools for all speakers. It’s clear why she is a popular and successful speaker.

    Whether you are a professional or aspiring speaker, there are several things you can do to be more effective. Her talk focused on the following 7 how-to skills:

    • How to distinguish ourselves from other speakers, and become well known in our area of expertise,
    • Defining and communicating your unique gifts and talents,
    • Promoting the qualities and attributes that make you different,
    • Sharing your own motivational stories,
    • Infusing your presentations with take away messages,
    • Creating presentations that are valuable for large audiences,
    • Developing topics that are content rich, timely and relevant.

    Want to learn more about her tools?  Read more here


    Annabel is the vice president of the Speakers Association of Hawaii, a business consultant, trainer and professional speaker for 20 years. She provides training and motivational speeches at conferences, conventions and businesses, and she works with organizations to help them to overcome obstacles during challenging drives, provide outstanding customer service and boost employee productivity and effectiveness. She has been a professor of business communications, public speaking and professional development at Hawaii Pacific University, University of Hawaii, and Chaminade University.

    Two of her videos can be found here:
    On Communication Strategies
    and, Put Your Dreams to Work


    If you like my posts why not contribute to helping spread the word?
    Thanks in advance for caring and sharing this post on your social media sites.
    For more stories, visit robertkinslow.com

    Fly the Toxic Skies

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    Maybe you’ve seen me and my family on a flight between Hawaii and the Mainland. We were the people sitting uncomfortable in our seats with white, cotton gloves, a sweatshirt with hood covering our heads, and a face mask. The rest of the passengers were typical American flyers, oblivious to the pathogenic germs that surrounded them.

    As a medical anthropologist I am sensitive to the health hazards of flying. Apart from the mechanical problems that can cause issues, there is the radiation exposure, exposure to internationally-sourced pathogens, low cabin pressure with low oxygen content, and dehydration. But it wasn’t until I started to plan a trip “down under” to New Zealand and Australia that I realized another toxic aspect of flying.

    Fly the Toxic Skies

    Airlines going to certain countries must spray passengers and their luggage with pesticide to kill insects. This is sometimes done right before takeoff, as flight attendants walk down the aisle with a pesticide spray can in each hand, fumigating the entire plane and its passengers and luggage with pyrethrin or d-pyrethroid insectside. You then have to breathe in this spray for the full flight time under pressurized cabin conditions. Other times, the spraying is done just before letting passengers leave the plane on arrival. The other method of application is a long-lasting residual spraying of the interior of the plane when passengers are not onboard. Sometimes, the plane is pre-sprayed with long-lasting spray followed by fumigation when passengers are onboard.

    The World Health Organization requires this spraying to prevent the spread of disease-causing mosquitoes and other insect pests. Some places, like Australia, New Zealand, and Tahiti, require all in-bound flights from anywhere to be sprayed. The WHO claims that, “Passengers are sometimes concerned about their exposure to insecticide sprays during air travel, and some have reported feeling unwell after spraying of aircraft for disinsection. However, WHO has found no evidence that the specified insecticide sprays are harmful to human health when used as recommended.” They fail to mention that the lack of evidence is from a lack of research.

    One study explains that, “Although approved by WHO for aircraft disinsection, certain adverse health effects on cabin crew and flight attendants, such as dizziness, nausea, fatigue and mild disturbance of consciousness, have been reported by various researchers. Recent toxicological studies have also identified adverse neurological effects, age-related disease, and abnormal development of fetal brain in rats and mice resulting from exposures to pyrethroids.”

    The Centers for Disease Control claims that flight crew and passengers have been harmed by disinsection. In addition, pesticides cannot be used outside of their approved uses, and no pesticide has been approved by the EPA for use in passenger cabins on commercial aircraft.

    The CDC article concludes with the following observation.

    Research gaps
    •It is unknown whether long-term exposure to the chemicals used in aircraft disinsection might cause health effects in air and ground crew.
    •Pesticides used for aircraft disinsection are mixtures including solvents, propellants, surfactants, and synergists. Research on the health effects of exposure to these mixtures, as well as possible combined effects with other chemicals present in aircraft environments, are needed.
    •Although pyrethroid pesticides are generally not believed to cause allergy or asthma symptoms, allergic sensitization, asthma symptoms, and anaphylaxis (a sudden and severe allergic reaction) have been reported related to exposure to commercial aircraft disinsection products.Additional research is needed to clarify the relationship between disinsection and asthma/allergy.
    •Reports from passengers and air crew suggest that there are major differences in how disinsection is performed. Better understanding of current practices is needed.
    •Further studies of aircraft surfaces and air crew are needed to evaluate whether repeated applications of insecticides in a cabin, or improper application of pesticides in aircraft, might cause increased exposure.
    •Some insects are resistant to the pesticides used in aircraft disinsection. Research to evaluate the usefulness of chemical disinsection, as well as non-chemical and engineering controls that can be used as an alternative, is needed.

    FYI, here are places where you will be sprayed. Frankly, I didn’t know about disinsection spraying for trips to Australia or New Zealand until I called Fiji Airways to speak with a ticket agent. The voice message while I waited announced that they treat all flights with pesticide to prevent the introduction of pests. I didn’t yet realize that disinsection was a requirement for all carriers, so I decided to check into Hawaiian Airlines, my hometown carrier, to see if they did the same.

    I discovered that Hawaiian Airlines also uses disinsection on flights, which they explain on their website.  However, unlike Fiji Airways, Hawaiian Airlines does not let customers know up front about the spraying. Unless customers search the Hawaiian Airlines website for disinsection, nothing is told to customers about being sprayed until they are in the plane and the flight attendants are beginning the fumigation.

    There was one time in the past when I experienced being sprayed on a plane. It was about 20 years ago, on a flight from Thailand to the UK. It was a terrible feeling being forced to breathe pesticide. Usually, we avoid breathing in these poisons, so when you’re forced to breathe it on a closed airship with recirculated air, there is an instinctive recoil and sense of horror. Why would Hawaiian Airlines not let passengers know about being sprayed before entering the plane?

    I asked the management of Hawaiian about this in an email. I wrote:

    Hawaiian Airlines flights to Australia, New Zealand, and Tahiti are subject to disinsection.
    I realize that disinsection is required by these destinations. However, it has come to my attention that HA does not inform passengers that they will be sprayed with pesticide until after the passenger has boarded the plane.
    While disinsection may be mandatory for those destinations, it does not justify HA waiting to notify passengers that they will be subject to spraying until the passengers have boarded. As you may know, some airlines, such as Fiji Airways, inform potential customers of their disinsection requirements up front, prior to ticket purchase. This seems reasonable given the potential for adverse health reactions to the spray, and the desire by some passengers to not be sprayed by pesticides for personal, health reasons.
    Is there a reason why HA does not give advanced notice of disinsection to passengers to these destinations prior to ticket purchase?
    What would be the procedure if someone objected to being sprayed while onboard?
    Are there any mitigations offered by HA to passengers prior to spraying, such as the use of masks?
    Thank you for helping me understand HA procedures concerning this use of pesticide on passengers and the lack of advanced notice.
    Here is their reply:
    On behalf of Hawaiian Airlines, I understand your concern regarding the disinsection procedures we follow while flying to Australia, New Zealand and French Polynesia.
    The treatment, which is intended to prevent harmful pests from entering these destinations is required by each government and their authorities. All airlines arriving in Sydney, Brisbane, Auckland, and Papeete must meet the stringent requirements for insect control. Other airlines may elect to treat the entire aircraft by saturating it with the chemical on a periodic basis. Hawaiian Airlines elects to have the aircraft sprayed upon arrival, which reduces exposure for our guests.
    As disinsection is a requirement by the governments of Australia, New Zealand, and French Polynesia, we currently don’t provide messaging about the disinsection process upon purchasing a ticket to destinations in our South Pacific destinations. Please know that we’ve shared this with our Web Support Team for their review in order to add specific travel information for these cities.
    Our flight attendants are required to make the disinsection announcements after each flight has safely landed. If a guest insists on getting off the aircraft for health reasons, they first must advise any flight attendant upon hearing the announcement. The governments of Australia and New Zealand will allow guests to disembark during the on-arrival disinsection treatment of the flight, but they require that all carry-on items to remain on board for the process. Guests will be allowed back on board by the Quarantine officers once the disinsection process has been completed to collect their items.
    We do not offer any mitigation to guests during the spraying process, although guests are free to use their own masks. We make it known prior to disinsection that the spray we utilize is non-toxic to humans and approved by the World Health Organization and Australasian authorities.
    While flight crew members and some passengers may disagree that the spray is non-toxic to humans, at least Hawaiian Airlines has apparently agreed to make the issue known up-front on their website. We’ll see how they accomplish this.

    The other question is what happens when a sprayed plane is used for flights to other places that don’t require spraying, needlessly exposing passengers to pesticide residues. I asked a Hawaiian Airlines customer service person if airplanes remain dedicated to certain flights, or are shuffled to other routes. This is an issue for United Airlines, which sends its disinsected, pesticide-coated planes to Mainland routes, which means passengers to LAX or San Francisco, for example, are unintentionally exposed to pesticides meant for passengers going to spray-requiring countries. I was told that Hawaiian does not do this. Pesticide contaminated planes are only used on flights to disinsection destinations.

    One other issue to keep in mind is when traveling with pets. Cats are not able to metabolize the pesticides used on planes, and can die. So if you are traveling with a cat, you may want to choose a different destination.

    Meanwhile, you may want to do what we do when traveling. Wear gloves at all times, keep your body covered to prevent skin contact with pesticide (and germ) coated surfaces, cover your head with a hoodie, and wear a face mask. You may also want to select travel destinations based on whether or not you will be fumigated. Travel may be fun, but it’s no fun when you are poisoned.

    We also need a determined effort to find alternatives to using pesticides. While the dangers of spreading disease through air travel is real, the solution should not itself be a health threat. Most importantly, people have the right to know about being sprayed so they can make informed choices with their travel plans, and their health.

    Trump Tax In Hawaii?

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    One of the more visible tax issues that our lawmakers will be thinking about this session is how to adapt the new federal tax law changes, sometimes called the Tax Cuts and Jobs Act and what we have been calling Trump Tax, to Hawaii.

    Each year, our Department of Taxation is required to consider the federal tax changes that have taken effect during the prior year, and then present a bill to the legislature containing its recommendations on conforming the state tax law to the federal code.

    Why do we conform to the federal code in the first place?  “It is the intent of this chapter,” our income tax law says, “in addition to the essential purpose of raising revenue, to conform the income tax law of the State as closely as may be with the Internal Revenue Code in order to simplify the filing of returns and minimize the taxpayer’s burdens in complying with the income tax law.”  This language was enacted in 1957 and has stayed the same for the last sixty years.

    We aren’t the only state to conform to the code.  Most states do, as shown on this map from the national Tax Foundation:

    Against this backdrop, our Department of Taxation’s recommendation for conformity was: “Let’s not do it.”

    You like the mortgage interest deduction and you don’t want to see it go away?  It won’t.  Perturbed by limits on the deduction for state and local taxes?  Don’t be, because we won’t adopt the limit.  You like your miscellaneous itemized deductions?  You can still take them!  The only small difference is that you can take them for Hawaii income tax only.

    Is this what we want to do?  Turn back the clock sixty years?

    You might remember the Tax Reform Act of 1986, which, like Trump Tax, took away many special deductions in favor of a simpler, broader tax calculation with a lower rate.  In 1987, Hawaii faced the same choice.  To conform or not to conform, that was the question.  But instead of turning our back on conformity, we embraced it.  We adopted the Tax Reform Act changes and dropped our individual tax rates.  As a result, most of us are spared the pain of doing tax calculations a second time for state-specific issues and of keeping the records and audit trails necessary to support the numbers that we put into those tax calculations.

    Shouldn’t we be considering doing the same thing this time around as well