by Ted Kefalas
You’ve probably heard the old saying, “An apple a day keeps the doctor away.”
But in Hawaii, it’s actually the general excise tax that keeps doctors away, and the reason is our state’s general excise tax.
Private practice physicians in Hawaii have been complaining for years that the GET is a heavy financial burden for them, and that, for some, it has been the difference between continuing to practice in Hawaii, retiring or packing up and moving to another state.
At the same time, it is common knowledge that Hawaii has a doctor shortage, and luckily, legislators at the state Capitol now seem to be poised to do something about it.
As the first half of Hawaii’s 2024 legislative session came to a close late last month, the House Finance Committee passed HB1675, which would provide a GET exemption for primary care medical services.
This means there still is an opportunity for Hawaii voters to weigh in on this issue.
One astounding fact to perhaps remind legislators about is that Hawaii is the only state to tax doctors in this way. Yes, that’s right — the only one.
Specifically, nonprofit medical facilities in Hawaii are exempt from the GET, but private practice physicians are not. Private practice doctors and clinics must pay the state’s 4% GET plus any county surcharge.
In some cases, doctors can pass along the tax to their patients — which increases the cost of healthcare for Hawaii residents. But federal regulations prohibit doctors from passing along the GET to Medicare and TRICARE patients, which means Hawaii’s doctors have to pay those GET costs themselves.
According to a 2023 Grassroot Institute of Hawaii report, this comprises a significant expense, making it difficult for private medical practices to thrive in our state.
The state Department of Taxation testified that lifting the GET on primary care providers would cost the state only about $35 million a year in “revenue losses,” which would be a small price to pay for alleviating Hawaii’s acute doctor shortage.
And the state could certainly afford it. The state Council on Revenues, for example, estimated in January that the state general fund is expected to bring in more than $9.5 billion in fiscal 2024.
The fact remains that without a GET exemption, many Hawaii doctors will continue to struggle financially, and Hawaii residents will continue to suffer as more and more doctors either retire or take their medical skills elsewhere.
HB1675 is a good bill that our state needs to improve healthcare access, and my hope is that legislators will approve it and send it to the governor for his approval as well.
The governor is a doctor, after all, so the chances are good that he would sign it — if the bill were to make it that far.
If you would like to help make sure this bill makes it into law, consider writing an email to your elected representatives.
One easy way to do that would be to go to the Grassroot Institute’s “Take Action” page at GrassrootInstitute.org/action where you can easily and quickly customize a letter that you can send.
It would be great to have more doctors in Hawaii. Exempting them from the GET is one way to make that happen.
TED KEFALAS is director of strategic campaigns for the Grassroot Institute of Hawaii.
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