STAND. COM. REP. NO. 632

Honolulu, Hawaii

RE: S.B. No. 1463

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirtieth State Legislature

Regular Session of 2019

State of Hawaii

Sir:

Your Committees on Agriculture and Environment and Energy, Economic Development, and Tourism, to which was referred S.B. No. 1463 entitled:

"A BILL FOR AN ACT RELATING TO TAXATIOn,"

beg leave to report as follows:

The purpose and intent of this measure is to create a revenue-neutral measure with the existing fuel taxes and to:

(1) Replace the environmental response, energy, and food security tax with a carbon emissions tax on the sale of all fuels with carbon content; and

(2) Repeal the state fuel tax.

Your Committees received testimony in support of this measure from the University of Hawai‘i, The Nature Conservancy Hawai‘i, Blue Planet Foundation, and two individuals. Your Committees received testimony in opposition to this measure from three individuals. Your Committees received comments on this measure from the Department of Taxation; Department of Agriculture; Department of Health; Department of Business, Economic Development, and Tourism; Department of Land and Natural Resources, Department of Transportation; We Are One, Inc.; Life of the Land; Tax Foundation of Hawaii; Elemental Excelerator; and Sierra Club of Hawai‘i.

Your Committees find that transportation-generated greenhouse gas emissions are a significant contributor to climate change, and an effective way to reduce greenhouse gas emissions is to put a price on carbon.

Your Committees further find that the best means of carbon pricing for the State is a use-based tax on all carbon dioxide-emitting fuels, such as oil, gas, and coal. The Department of Taxation already implements various fuel-based taxes.

Your Committees also find that a state carbon emissions tax can be implemented by amending the environmental response, energy, and food security tax and repealing the state fuel tax, which changes would likely sustain current levels of state revenue and thereby make this measure revenue-neutral.

Your Committees have amended this measure by:

(1) Directing the Department of Business, Economic Development, and Tourism, rather than the Department of Taxation, to annually submit proposed legislation suggesting amendments to carbon emissions tax rates based on the United States Energy Information Administration's determination of carbon dioxide emissions per energy source;

(2) Making the measure effective on January 1, 2021, and making the repeal of the fuel tax credit for commercial fishers applicable to taxable years beginning after December 31, 2019, to provide the Department of Taxation with sufficient time to update forms and give notice and educate the public about the new carbon emissions tax and the repealed state fuel tax; and

(3) Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

As affirmed by the records of votes of the members of your Committees on Agriculture and Environment and Energy, Economic Development, and Tourism that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 1463, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 1463, S.D. 1, and be referred to your Committees on Ways and Means and Judiciary.

Respectfully submitted on behalf of the members of the Committees on Agriculture and Environment and Energy, Economic Development, and Tourism,

________________________________ GLENN WAKAI, Chair

________________________________ MIKE GABBARD, Chair