Bill to reduce taxes on groceries, nonprescription drugs in Hawaiʻi dies in committee

A bill that would have reduced the general excise tax rate on groceries and nonprescription drugs over time died Wednesday during a Hawaiʻi House of Representatives committee hearing.

Rep. David Tarnas of the Big Island said the introducer of HB1611 needs to address some of the concerns regarding what the actual financial impact would be if the tax were eliminated over time.

“I think it’s a good idea, but I think we need to answer more of these questions for us to move forward responsibly,” Tarnas, chair of the House Judiciary committee, stated in the hearing. “I can’t in good conscience move forward a bill that could have more than a quarter of a million in fiscal impacts.”

HB1611 would have established a yearly reduction in the now 4% general excise tax rate on groceries and nonprescription drugs starting Jan. 1, 2027, with a 3.5% rate and decreases of .5% each year until the full exemption would be reached in 2034. It also would have prohibited counties from imposing a county surcharge on groceries and nonprescription drugs.

According to legislative researchers and coordinators in the Public Access Room at the state legislature, similar bills have been introduced numerous times in different forms over the years, and all have failed to pass.

The state Department of Taxation said during the hearing it recommended the bill more specifically define groceries and nonprescription drugs so they could provide a better estimate about how much this would change the general exercise tax revenue.

Rep. Elle Cochran of Maui and member of the judiciary committee said her staff gave her numbers that showed an annual revenue loss of up to $220 million if the bill passed.

There was a lot of support for the measure statewide.

Written testimony from Amy Miller, CEO of Hawai‘i Food Bank, said one in three households —including families with children — are struggling to access adequate food.

“One in five households have individuals who are skipping meals or going whole days without eating on a regular basis,” Miller said. “In addition, an estimated 45% of Hawai‘i’s families are at the ALICE (asset-limited, income-constrained, employed) threshold or below — and nearly half of those below the ALICE threshold face food insecurity.”

She added: “Eliminating the general excise tax on groceries would allow our food insecure neighbors to afford more nutritious food each time they visit the grocery store. It would have a significant, positive impact on food insecurity rates and the health and well-being of our community.”

Hawai‘i Appleseed Center for Law and Economic Justice provided written testimony stating Hawaiʻi is one of only seven states that taxes groceries.

The general exercise tax and sales taxes in general are widely regarded as regressive and unfair to low-income families, the testimony said.

In Hawaiʻi, the bottom fifth of households spend nearly 9 percent of their annual income on the GET, compared with the top fifth of households that spend less than 4 percent.

“In Hawaiʻi, where a family of four needs roughly $110,000 annually to meet basic needs, it is critical these changes reduce the burden on low-income households who are least able to absorb the state’s high cost of living,” the Hawaiʻi Appleseed Center said.