March 2006 #2. Is the GE Tax Increase Constitutional?.

Authorby Ronald I. Heller

Hawaii Bar Journal

2006.

March 2006 #2.

Is the GE Tax Increase Constitutional?

Hawaii State Bar JournalMarch 2006Is the GE Tax Increase Constitutional?by Ronald I. HellerIn 2005, the Hawaii Legislature passed Act 247, giving each of the counties the power to add a surcharge to the general excise and use tax. However, the restriction as to how the additional tax revenue may be used is narrower for the City and County of Honolulu than for any of the other counties. This raises a constitutional question: Can the Legislature validly grant unequal powers to the counties?

As explained below, the answer is not clear. The purpose of this article is simply to point out that a serious question exists, and that arguments can be made on either side.

Act 247 does not expressly grant lesser powers to the City and County of Honolulu. Instead, it divides the counties into two classes: those with a population greater than 500,000 (i.e., Honolulu) and those with a population less than 500,000 (all other counties). The Act then has two different subsections defining the way that the county can use the additional tax revenue. For counties with a population over 500,000, it provides: The county surcharge on state tax shall not be used to build or repair public roads or highways, bicycle paths, or support public transporta- tion systems already in existence prior to the effective date of this Act.1

For counties with a population under 500,000 there is no such limitation. Instead, they are free to use the funds for:

Operating or capital costs of public transportation within each county for public transportation systems, including public roadways or high- ways, public buses, trains, ferries, pedestrian paths or sidewalks, or bicycle paths;2

Thus, the City and County of Honolulu is prohibited from using the new revenue to build or repair roads, highways or bicycle paths, or to support public transportation systems already in existence. Other counties, however, are free to use the new revenue for these purposes.

Article VIII, Section 1 of the Constitution of the State of Hawaii provides that the Legislature shall grant powers to the counties by "general laws":

The legislature shall create counties, and may create other political subdivisions within the State, and provide for the govern- ment thereof. Each political sub- division shall have and exer- cise such powers as shall be conferred under general laws. [emphasis added]

In A.G. Opinion 61-36,3 the first question presented was the meaning of the term "general laws" as used in Section 1, Article VII (subsequently re-numbered as Article VIII) of the Constitution of the State of Hawaii. The Opinion states that a general law "is one that operates equally, without discrimination as to particular localities ..."

A general law is distinguished...

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