When we were in the midst of the COVID-19 pandemic and Governor Ige was peppering us with emergency proclamations early and often, we at the Tax Foundation accepted that the Governor had emergency authority but questioned some of the things it was being used on. For example, we were one of several nonprofits to challenge his wholesale suspension of the open meeting laws and public records laws in his earlier proclamations.
We saved our harsher criticisms, however, until the Governor “crossed the Rubicon” by suspending tax laws. We argued that the Governor had no business suspending tax laws—at that time, to scoop up the hotel room tax money that was supposed to go to the counties.
Recently, Governor Green did the same thing. In his Fourth Emergency Proclamation on Homelessness, he suspended the General Excise Tax as it related to vendors involved in the design, construction, sale, lease, or financing of housing projects designed to provide rapid relief to the homeless.
The idea, apparently, was to provide vendors involved with the development of housing for the homeless the same tax exemption that is already provided for affordable housing. A state agency (the HHFDC) would have to sign off on the project just as it does for other affordable housing projects.
If that was the idea, then, it seems to us that it would be easier and cleaner for the HHFDC to conclude, whether or not Governor Green told it to come to that conclusion, that the homeless housing projects qualified as affordable housing under the existing tax laws. That way there is less tension with the Legislature, who under our system of government is supposed to have the power to tax and spend, and thus to grant exemptions from the tax laws.
Further, under the existing proclamation it is difficult to connect taxation with an emergency. Even if we accept the premise that our current level of homelessness is an emergency and that we need to get housing built pronto, tax really doesn’t figure into the equation if the government is paying for the housing anyway. If the tax is suspended, the housing costs $100 and the government pays $100. If the tax applies, the housing costs $104.17, the government pays that amount, and it gets $4.17 back in taxes. It’s still out the same amount, $100. And if the housing is being paid for privately, the willingness of developers to use their talents to help the homeless situation will probably depend more on the regulatory environment, namely how long and at what cost the necessary permits can be secured.
The emergency powers statute, HRS section 127A-13(a), allows for suspension of “any law that impedes or tends to impede or be detrimental to the expeditious and efficient execution of, or to conflict with, emergency functions,” and allows the Governor to “[r]elieve hardships and inequities, or obstructions to the public health, safety, or welfare, found by the governor to exist in the laws and to result from the operation of federal programs or measures taken under this chapter, by suspending the laws, in whole or in part.” Can someone tell me which of these legal requirements is met by the suspension of GET as it relates to vendors designing, building, selling, or leasing housing to the homeless?