Hawaii Legislature Rushes Tax Bill Through, Accidentally Enacting a Tobacco Tax Cut

May 13, 2009

All state lawmakers should read the cautionary tale of Hawaii’s bumbling legislature. Thumbing their noses at Governor Lingle’s veto, they cast votes for what they thought was a big tax hike on tobacco. Trouble is: they didn’t read the bill, and it actually repeals the tax on several products. Forbes.com is carrying the AP story.

A mistake in a newly enacted state law is good news for pipe and cigar smokers, as well as those who use snuff and chew tobacco. The error gives them a four-month tobacco tax holiday.

The governor had actually warned the legislature about the technical errors in the bill when she vetoed it, but when they overrode her veto, they didn’t bother correcting them. Or perhaps they didn’t believe her. Or maybe it was late.

One might imagine that a quick fix would be in the offing, but not so, according to House Finance Committee Chairman Marcus Oshiro who said the mistake creating a tax holiday from now until September 30 can not be undone. So if you’ve got ’em, smoke ’em!

Seriously, though, the errors weren’t just on these less popular products. The accidental holiday on chew, snuff, cigars and pipe tobacco will only cost the state about $100,000 per month, but the legislators botched the big tax revenue generator, too, accidentally enacting a tax hike on cigarettes that expires in four months.

[Gov.] Lingle had said there was another problem with the legislation, resulting in the tax on cigarettes being raised to 14 cents per cigarette now and then dropped to 12 cents on Sept. 30.

That legislative gem could cost the state $22 million, and so they’re scrambling for an administrative remedy. But veteran Hawaii tax watcher Lowell Kalapa thinks the attempt to “blend” the enacted law into something resembling the intent of the legislature will fail because the last bill passed is the one that governs, and it leaves the cigarette tax at the old rate.

“To me, that is the law, and the law is the law. Basically, we have no rate increase in the cigarette tax,” he said.


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