In addition to encouraging customers to donate up to $249 to their favorite participating nonprofits – like the Tax Foundation of Hawaii – at checkout, customers are also encouraged to contribute to the Give Aloha matching gift in the following ways:

• Donate 250 Maika‘i points, equivalent to a $5 donation
• Round up grocery purchases
• Donate spare change
• Purchase Give Aloha x Suzanne Jennerich merchandise

Funds raised through the bulleted points above will help increase Foodland’s Give Aloha Matching Gift for all 2026 participating organizations.

Whether someone gives spare change or $249, they can feel good knowing they helped in some way to support the great work that all of you do to help us build a better Hawaii.

*** HOW TO DONATE TO THE TAX FOUNDATION OF HAWAII ***

• let your cashier know you want to make a donation to the Tax Foundation of Hawaii
• be ready to give TFH’s organization code – 77689 – and the amount of your donation
• Your donation will appear on your receipt

The program supports scholarships for American students, but in a very indirect way.  It supports scholarship-granting organizations (SGOs), 501(c)(3) nonprofits that give out scholarship money to deserving primary and secondary school students.  Under the program, credits don’t go to the SGOs.  They go to individuals who donate money to the SGOs.  The federal nonrefundable credits match the individual donations, dollar for dollar, up to $1,700 per individual.  There are income limits for individual donors, so that donors get their donations matched if their income level is under a certain amount and get a tax deduction otherwise.

The SGOs, in theory at least, would be able to attract more donations from folks because those folks wouldn’t have a net economic loss.  And the SGOs could then give more money to more kids.

States have a role to play in this process too.  A state that opts in to the program is tasked with producing a list of qualified SGOs that award scholarships in that state.  This is, presumably, done to cut down the possibility of fly-by-night SGOs that take money and run.

Some states, including ours, were not eager to sign on to the program.  Would an opt-in election, for example, require the state to commit to specific Trump Administration policy priorities such as rescinding any DEI (diversity, equity, and inclusion) initiatives and terminating any LGBTQ support?  So far, the statute and existing Treasury guidance indicate that the only requirement to opt in is a commitment to come up with the SGO list.

Is this tax credit scheme just a way to implement a school voucher system, which would be politically problematic here because such a program tends to prioritize private schools over public ones, as HSTA and other school unions across the country have argued?  Not necessarily, as the nonprofit Edchoice.org argues, because SGO-granted scholarship money does not have to be spent on tuition.  It can go toward school supplies, transportation costs, fees for enrichment programs (band uniforms, for example), and other related costs listed in Internal Revenue Code section 530.

Shortly after the One Big Beautiful Bill Act became effective, some commentators wondered if opting in to the credit program would violate the Hawaii Constitution’s provision in Article X, Section 1 that taxpayer funds cannot be “appropriated for the support or benefit of” private education.  To us, this does not seem to be a problem because no state funds are appropriated and no state credits or other incentives are being awarded.

As a practical matter, furthermore, neither donors nor scholarship seekers are limited by Hawaii’s list.  They may donate to or apply for a scholarship from any SGO on any state’s list.  If Hawaii does not participate, the disadvantage will primarily be to smaller SGOs that are only known in Hawaii and thus might not make it to any other state’s list.

The only potential pitfall would be if the Trump Administration asserts that opting in to the program entails agreement to support Trump Administration policy positions.  So far, no such conditions have appeared in IRS preliminary guidance on the program, but, as some may say, the night is still young.

The letter concerns Granillo v. State, a 91-page opinion issued July 15, authored by Justice Todd W. Eddins and joined by Chief Justice Vladimir P. Devens and Justice Sabrina S. McKenna.  The case set a new Hawaii standard for post-conviction relief when forensic evidence presented at trial is later shown to be false.  The letter takes no issue with that state-law holding, but is concerned about the roughly eight pages that follow it, which the letter describes as “a sweeping attack on the integrity of the United States Supreme Court and its justices” across abortion, voting rights, campaign finance, partisan gerrymandering, presidential immunity, religious liberty, firearms regulation, administrative law, agency removal, federal spending programs, and birthright citizenship decisions out of the Court that have been handed down over the past few years.

The letter said that the eight pages were a screed that had nothing to do with the Hawaii Supreme Court’s holding.  This writer begs to differ.  Our supreme court noted that its decision was based on provisions of the Hawaii Constitution that are similar to those in the U.S. Constitution, but it was going to interpret our constitution differently, which it has the right to do, because there are interpretations of the federal constitution being handed down in recent years that our local justices could not stomach.  Those eight pages, which are not the court’s first swipe at SCOTUS and may not be the last, add to the justification for a Hawaii Constitution interpretation that differs from that of its federal counterpart.  “This court does not anchor Hawai’i’s due process rights to the federal floor,” the Granillo opinion says.  “Especially one that keeps sinking.”

The letter said that those parts of the Hawaii opinion were in defiance of the U.S. Supreme Court decisions and were harmful to the rule of law.  The letter cited what it called precedent “for taking disciplinary action against sitting judges who have wrongfully attacked the integrity of [the Supreme] Court.”

That precedent, however, a Seventh Circuit Judicial Council decision resolving complaints against a United States District Judge, actually says something else.  The Seventh Circuit case concerned a judge who wrote a law review article that was, like the Granillo opinion challenged here, sharply critical of U.S. Supreme Court decisions.  The Judicial Council stated:

The vast majority of Judge Adelman’s article at issue here consists of substantive criticism of Supreme Court decisions. Those criticisms are well within the boundaries of appropriate discourse. As noted above, much of Judge Adelman’s critique draws from the dissenting opinions of Justices in those decisions. Without endorsing or disagreeing with Judge Adelman’s views of those cases, the council finds no ground for discipline with regard to the vast majority of the article.

“Judges should expect tough criticism of their work,” the opinion added.  Sometimes their own colleagues, in dissenting opinions, are some of the harshest critics using the most pointed language.

We also observe that Judge Adelman was in a more vulnerable position because he was a federal judge whose court was supervised by the U.S. Supreme Court.  State court judges must follow federal interpretations of federal laws and the U.S. Constitution, but are in no way subordinate to the U.S. Supreme Court on issues of state law or the state constitution.  That is part of the way our government was set up.

We live in a society where freedom of speech is one of our most cherished values.  Judges, who discuss some of our most important legal and political issues, can be a key part of the debate on those issues.  We need to hear more from you, not less.

You go, Justices Eddins, Devens, and McKenna!

Our state does a lot of giving and taking when it comes to energy use.

We currently give tax credits for clean energy use and production.  I say “currently” because a bill enacted in this year’s legislative session terminates the tax credit for renewable fuels production as of the beginning of 2029, and imposes significant new limits on the renewable energy technologies credit now before doing away with it as of the beginning of 2030.

We also have a program called Hawaii Energy.  That program provides rebates and other incentives for people who are getting rid of old energy-using appliances, from light bulbs to water heaters and air conditioning units, and are replacing them with newer light bulbs or other appliances that are demonstrably more efficient than the old ones.

The rebates in the Hawaii Energy program don’t come from taxes.  Rather, they come from a state-mandated fee, known as the Public Benefits Fund surcharge under HRS section 269-121, that is charged to all electric consumers.  This includes renters, except perhaps for the few renters whose rent includes utilities.

Also on the taking side, we have special taxes that apply to energy consumption.  These include the fuel tax, which is applied to fuel for vehicles using the highways, and the barrel tax, which started off as a tax on imported petroleum but has since been expanded to include many different kinds of fossil fuels.

We then have a special registration fee surcharge, soon to be replaced with a road usage charge, for electric cars and other vehicles using the highways but don’t use fuel subject to the fuel tax.  Considered by itself, it looks like a penalty for using electric cars or alternative fuel vehicles.

With a new Legislature (well, mostly old but with a few fresh faces) coming in 2027, there are a few policy questions they might want to look at.  Mr. Lagon makes the point that contributions of renters (because they use electricity and are forced to pay in to the Public Benefits Fund) fund the rebates that are then made available to homeowners or property owners.  That sounds like a distribution of wealth away from the poor and to the rich(er).  But that impression isn’t quite right because the rebates reward the replacement of inefficient appliances, and the renters probably don’t own those appliances and so are in no position to effectuate the goal of pushing out old, inefficient appliances in favor of newer ones.

What we hope the Legislature will focus on is defining the vision for the future of our state, one that uses renewable energy or uses any energy efficiently perhaps, and then figuring out how we reach that vision.  Government generally provides infrastructure or services from which we all as a society derive benefits, and then distributes the cost of that infrastructure or services among those who derive the benefits, usually the taxpaying public.  The landscape of laws and regulations in which we find ourselves today is a mishmash of measures thrown together at different times to serve different needs.  When all the giving and taking is considered together, legitimate questions can be asked about who is benefiting and who is paying the price.  We then should be figuring out who matters, or what matters, and adjust our legal landscape accordingly.

This year, the Charter Commission has advanced 20 proposals to the November ballot.  Of these, six, or 30%, concern special funds.  Special funds are where your tax money goes outside of the normal budgeting and appropriation process.

The Charter now provides for five special funds in sections 9-204 to 9-206:  the Clean Water and Natural Lands Fund, the Affordable Housing Fund, the Climate Resiliency Fund, the Grants in Aid Fund, and the Honolulu Zoo Fund.  Each of the funds gets funding from an earmark on the real property tax, 0.5% of tax collections for each fund.  (The Grants in Aid Fund gets 0.5% off all general fund collections, which is a slightly different number.)  One of the charter proposals proposes to add a Food Security Fund, which would similarly be funded by a 0.5% earmark on the real property tax.

Other charter proposals seek to expand the uses of some of the funds.  Those proposals probably mean that those funds either are hoarding too much money now.  If not, we can probably look forward to lawmakers saying that the funds contain too little and that more tax money is needed for them.

We have previously spoken out about special funds, especially those in state government where we have around 2,000 of them.  Agencies that can spend money from special funds tend to spend them with little or no legislative oversight, and it becomes harder for the legislature and the public to keep track of the money the more special funds there are.  If you think it’s tough to balance a half dozen bank accounts, try 2,000 and see if your head doesn’t spin!  Furthermore, the earmark on tax revenues basically removes those revenues from any budgetary control.  If, for example, we had major damage caused by torrential rains, or a hurricane, or wildfires, could we use money in the Honolulu Zoo Fund to repair the damage?  Not unless the damage was to the zoo.  Not even the Mayor and City Council could do anything about it, because the special fund is in the charter and thus ranks above the Mayor and City Council.

Call me an old fogey, but I want budgeting decisions in the city in which I live to be made by elected officials.  Not bureaucrats who aren’t answerable to the people, not by artificial intelligence, and certainly not by voters picking some number out of the air and making the substantial dollar amount associated with that number avoid the checks and balances associated with our budgetary processes.

That way, if unforeseen problems or needs arise, then people are there to respond to the situation, people who are presumably concerned with the welfare of their constituents because their job depends on said constituents.

In short, if we don’t trust those fools in the City Council to make wise budget decisions, the answer isn’t to rewrite the budget ourselves using charter amendments.  We need to replace the fools with new ones.  That’s what our elections are supposed to be for.

Countless people and organizations have implored lawmakers to make “the wealthy” pay their “fair share.”  Of course, neither “the wealthy” nor “fair share” are defined.  Only the sentiment is tangible.

Mr. Higa points to the recent enactment of the millionaires’ 13% tax bracket as evidence of the sentiment.  It also appears in “Empty Homes Tax: Oʻahu Voters Blocked from Weighing In,” where Civil Beat seems to be disappointed because the Honolulu Charter Commission failed to advance an empty homes tax proposal to the November ballot despite obvious difficulties in implementation, constitutional issues, and resistance within the City Council.

The Bible warns in the Tenth Commandment, “Thou shalt not covet.”  Envy is identified as one of the Seven Deadly Sins.  “Envy is the one vice that never announces itself,” Higa writes.  “Pride struts and greed hoards, but envy always arrives dressed as justice.  A tax on millionaires feels like fairness.”

He has a bigger house than I, or a better car, or a boat where I don’t.  I can’t do much about it by myself, but government can cut him down to size with the power of taxation.  Taxation, however, is not supposed to be about retribution.  “Taxes are what we pay for civilized society,” wrote Supreme Court Justice Oliver Wendell Holmes.  Government provides services to society and the costs are spread among us.  Government also can collect fines and penalties to punish misconduct, but earning money and being wealthy, in our system of capitalism, are perfectly legal.

The other scary thing about taxation derived from envy is that the target of the envy can and does shift over time.  Higa writes, “Envy is fed like a furnace.  Social media puts every lifestyle on earth in every pocket in Hawaiʻi, heaping the coal into the flames.  Envy becomes a mood — a low, constant awareness that somebody, somewhere, has the kitchen or the vacation or the body you were denied.  A mood cannot be satisfied, but it can be channeled, and it is channeled toward whatever target happens to be within reach.”

It may be a millionaire’s tax today.  Next year, or maybe the year afterward, it could change to a tax on half a million because those people are “wealthy.”  (Or the million won’t be worth as much as it is this year, due to inflation.) The envious may also want to dial up the pain.  Maybe a 13% tax is not sufficient to be a “fair share.”  Would 14%, 15%, or 20% be fairer?  We will certainly see legislative proposals to move either or both levers.

As Higa writes, “Hawaiʻi already carries one of the heaviest state-and-local tax burdens in the country.  The needy are not much better off for it.  The burden of our state shows up in the rent, in the grocery bill, in the exodus of local families headed to Las Vegas.  A man who can imagine no way to feed a widow except by voting to tax his neighbor has not discovered compassion.  He has misplaced his imagination, and it is worth asking where he lost it.”

“Envy had finished its work in Cain long before he lifted his hand.  It hollowed him first.  It always hollows the envier first, depriving him of the blessings he has by making them invisible.”

“The exit is not a cleverer tax or a purer market.  It is contentment — the settled conviction of having received more than one was owed.  It frees a man to look at his neighbor’s good fortune and simply be glad.”

We hope that lawmakers and the rest of us alike can enjoy this freedom.

This week we will be discussing the line-itemed bill, SB 2600.

Back in 1978 when we last had a constitutional convention, delegates thought that government shouldn’t be keeping the people’s money if it didn’t have to.  “Your Committee believes that it is proper for the State’s taxpayers to benefit from any surplus in the State’s general fund balance,” they said.  Thus, they put before the voters, and the voters approved, what became Article VII, section 6 of our Constitution.  It says that if our general fund balance is more than 5% of general fund revenues for two fiscal years in a row, then the legislature is supposed to enact a tax credit or refund to give some of that money back to us taxpayers.

As we wrote about earlier, it only took lawmakers a couple of years to squash this provision into insignificance.  In nearly every year between 1983 and 2009, lawmakers gave us a $1 credit, called the general income tax credit, whenever the constitutional provision was triggered.  The exceptions were in 1989 and 1990.  And in 2010, at lawmakers’ urging, we voters approved an escape hatch for this provision, allowing lawmakers to feed our rainy day fund instead of giving us a credit.  In later years, again at lawmakers’ urging, we approved other amendments allowing lawmakers to send the surplus to funds intended to pay down the State’s debt or fund its pension obligations to State workers.

In recent years, our Legislature routinely considers a bill to satisfy Article VII, Section 6.  The bill provides for a tax credit in a blank amount, an appropriation to the rainy day fund in a blank amount, and appropriations to the debt service and post-employment benefit funds, again in blank amounts.  SB 2600, as originally introduced, was that bill this year.  It was what we call a Blankety Blank bill.

As the bill traveled through the Senate, and then through the House, lawmakers were urged to approve the bill as is, although it was impossible to know whether they were thinking about giving taxpayers a credit in any amount, or how much general fund money was going to go through one or more of the three constitutional escape hatches.

Lawmakers played along.  That’s why the subsequent drafts of the bill, Senate Draft 1 and House Draft 1, look pretty much the same as the original, with none of the blanks filled in.  The only draft that had a specific number in it, Conference Draft 1, was filled in after closed-door conference committee meetings.  At that time, no public input was invited or accepted.

It’s like going to an appliance dealership where the salesperson asks you to sign a contract to buy an appliance where the price and terms are blank.  “Don’t worry!” says the salesperson.  “I’ll get you the best possible deal on the best possible terms!  Trust me on this!”

I would never sign such a contract or recommend that anyone do that.  “Know what you are signing before you sign” is essential consumer advice, so shouldn’t it apply to lawmakers too?  To me, asking lawmakers to vote on a Blankety Blank bill fails to respect the lawmakers and their responsibilities.  It’s telling them to vote on a bill when they have no idea of or control over its content.

The final draft of SB 2600 appropriated $50 million to the rainy day fund.  The Governor didn’t like that because our rainy day fund already has more money in it than it has ever had and we have current and pressing state needs, so he cut the amount down to $1.

That, for this year, was the one dollar solution.

Our state constitution has a number of provisions in it that are designed to control how our government spends our money.  (Not “their” money, hmph.)  Most of these provisions are in Article VII.

Section 11 of Article VII contains what we call the Lapse Provision.  It basically says that when lawmakers appropriate taxpayer money (from the general fund or from general obligation bonds, which are borrowings against taxpayer money) to a state agency, the agency has three years to spend it or encumber it (meaning that the state has a binding contract to spend that money).  If it doesn’t, the money would return to the general fund, to be available for appropriation by the lawmakers who are then in power.  According to records from the 1978 Constitutional Convention where the provision was drafted, the purpose of the Lapse Provision was to encourage agencies to review the programs that they had.  If a program wasn’t working, the agency could get rid of it; if it was, the agency could get reauthorization from current lawmakers so the program could continue.

Some agencies, however, were not on board with the idea.  They tended to view money appropriated to them as “their” money (as opposed to taxpayer money).  They naturally preferred to spend their money when and as they saw fit, without having to be bothered with going back to the square building on Beretania Street again.

Not too long after the constitutional provisions were adopted, someone had a bright idea for a workaround.  The Lapse Provision only applies to spending of general fund money and general obligation bond proceeds.  It does not apply to spending from special funds.  So, they said, the problem is solved if money is simply moved from the general fund to a special fund.

Agencies marveled at the simplicity of this workaround.  Soon, non-general funds began popping up like weeds.  The State Auditor began warning that such funds led to “insidious” financial results  when there were only 166 of them.  Over the years, the number ballooned.  There were more than 1,800 in 2020.  Some are legitimate, such as special funds for self-sustaining programs, as the constitutional convention committee explained.  Some, however, are there to work around the constitutional expenditure controls like the Lapse Provision.  There are now so many special funds that it is impossible for anyone to say with certainty how much money our state government has.

The Dam Special Fund, established by Act 232 of 2024, uses taxpayer money to subsidize repairs on aging dams to mitigate the public safety risks from catastrophic events such as dam failures.  This is a perfectly legitimate use of taxpayer money, as long as it is in line with lawmakers’ priorities which, naturally, change over time.  That is why it needs to be reauthorized periodically and was in fact reauthorized in the 2025 budget bill.  However, the Dam Special Fund was set up — and the bill itself says this — specifically to avoid the possibility of funds lapsing.  We saw the fund as illegitimate and asked the court to declare it so.

The Circuit Court saw the matter a little differently.  It saw only one appropriation of general fund money in Act 232 — a transfer from the general fund to the special fund, which was accomplished within the three-year period.  No constitutional issue.  End of case.  Final judgment is in favor of the State.

But is it really that easy to avoid the constitutional expenditure controls?

It looks like we will need to ask higher courts to weigh in on this matter.

We have written about such a tax on several occasions before, most recently here.

The Honolulu City Council considered different versions of this tax in Bill 6 (2020), Bill 9 (2022), and Bill 46 (2024).  On each occasion it failed to pass.

But that hasn’t stopped proponents of the idea.  They have brought the matter to the Honolulu Charter Commission, the folks charged with proposing amendments to the Honolulu City Charter to be voted on at the November general election.  The City Charter, of course, is the foundational document for city government, much like the Hawaii Constitution is for our state.  These documents generally can’t be changed by the legislative bodies; any amendments need to go before the voters to be approved.

Recently, a Charter Commission committee shortlisted the empty homes tax proposal, known as P170.

P170 directs that the tax be imposed at no less than 2%, or $20.00 per $1,000 of taxable value, for any home that is “empty” for more than six months in a taxable year.  This is many times the current residential property tax rate of $3.50 per $1,000 of taxable value.

One hang-up with the proposal is how the concept of “empty” is defined.  There may be good reasons why a home is empty. Even the proponent of P170 has asked for exemptions to be written in to the charter provision:  “Exempt from this surcharge shall be properties that: have a valid homeowner exemption; are the principal residence of an Oahu resident more than 180 days a year; have owners on military deployment or absent due to ongoing medical care, or where the property is the subject of probate court proceedings.”  Bill 46 (2024) had even more exemptions, around 15, including that the dwelling on the property is “not fit to live in,” the owner is making “active efforts” to sell or rent the property, or there is renovation work ongoing that “reasonably requires” the owner to live elsewhere.  And how does one even enforce the tax in the first place?  How does the city government verify that a home is “empty” without looking inside, which would be a violation of privacy laws?  And how is a person accused of having an empty home prove that the home was not, in fact, empty?

Also telling is the fact that the Department of Budget and Finance, which would have to enforce this tax somehow, complained in 2024 that Bill 46 “may not fully recognize the required staffing, resources and timetable to properly implement this type of program.”  In other words, they had doubts that they could enforce the new tax with the staff they had.

It’s also worth repeating that county governments only have the authority to impose real property tax.  This power was given to the counties by the 1978 constitutional convention, which basically transferred the then-state real property tax over to the counties.  An empty homes tax doesn’t look or feel like the real property tax as it existed in 1978, so there may be some question as to whether the county can enact the tax, whether by ordinance or charter amendment.

In any event, this issue isn’t going to go away soon.

We hope that wise and cool heads prevail in the end.

It’s about the federal SNAP program to help needy families with food costs.  It used to be fully funded by the U.S. Department of Agriculture.  So, Hawaii citizens benefited from this federal largess to the tune of about $700 million a year.

The OBBBA changed this.  Now, the USDA audits the States, who are responsible for running the program and paying out the benefits, and if a State paid out too much or too little, then the State will need to pick up an escalating share of the cost depending on our “error rate.”  If our error rate is less than 6%, the USDA picks up all benefit costs as they did before.  If it’s between 6% and 8%, we need to pony up 5%, which would be around $36 million.  Between 8% and 10%, we are on the hook for 10% of the benefits.  And if the error rate is 10% or more, then we get socked for 15%, which would come out to about $109 million — which isn’t in our budget.

And then, of course, the feds didn’t make it easy for the States to comply.  We wrote about some of the drama here.  The issues included federal policy changes that kicked in immediately, giving states zero time to learn about the new changes and work them in to their processing procedures before they were made accountable for errors.

Historically, we have had issues even before OBBBA.  Our error rate for 2022 and 2023 exceeded 20%.  The USDA was thinking about whacking us with a $11 million fine, but our folks managed to talk their way out of it with promises of new, badder, and better computer system that our Legislature had no choice but to fund.

In 2024, our error rate dropped to 6.68%.  It was much better than the previous two years, but still left lots of room for improvement.

Now the 2025 error rate is out.  There is good news and bad news.

The good news is that we don’t have the worst error rate, and ours was just slightly above the national average.  Also, the penalties don’t take effect just yet.

The bad news is that our error rate was 10.92%.  Double digits mean triple penalties, and don’t expect anyone to cut us some slack.  “These payment error rates are further proof that state accountability is severely lacking in SNAP,” Agriculture Secretary Brooke Rollins said in a statement. “USDA has taken historic action to help interested states curb SNAP waste, and I hope other states, regardless of political leadership, prioritize needy families and the American taxpayer over politics.”

The Star-Advertiser reports that our Department of Human Services is keenly aware of the problem and is working hard to fix it.  DHS reported that its error rate through the end of June was 6.52%.

Again, that’s an improvement, but we are still in penalty territory.  We should be able to do better.  Our error rate for most of the last two decades was under 6%, so we should be able to get ourselves out of the proverbial hot water.

The Trump Administration was able to trot out J.D. Vance to make us a national laughingstock over Medicaid fraud enforcement.  The last thing we all want is for the administration to set us up on another issue, this one with a massive price tag which we probably won’t be able to wiggle out of like with the proposed $11 million fine.

Let’s do this.