THE SENATE	S.B. NO.	1330
TWENTY-EIGHTH LEGISLATURE, 2015
STATE OF HAWAII

A BILL FOR AN ACT

relating to STATE FINANCES

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that current revenue estimates are “static” and fail to account for behavioral changes caused by new regulations and taxes. Developing a model that considers the probable behavioral responses of taxpayers, businesses, and other citizens to changes in state tax laws will ensure proposed regulatory and tax changes will promote economic growth. “Dynamic” revenue analysis considers the macroeconomic impact of legislative decisions, including behavioral responses to tax decisions. Such models are currently being used in twenty states. The legislature recognizes a dynamic tax model must be constructed in order to consider dynamic revenue estimates. The benefits of building a dynamic tax model system will:

(1) Improve the State's ability to predict the responsiveness of tax revenue to changes in the tax code;

(2) Enrich the State's insights into how taxes affect Hawaii's competitiveness in a national and global economy; and

(3) Enhance the State's capacity to identify what segments of Hawaii's economy are most sensitive to tax changes and which segments bear the burden of government finance.

Accordingly, the purpose of this Act is to appropriate funds for a public finance economist to construct and maintain a dynamic tax modelling system at the Economic Research Organization at the University of Hawaii (UHERO).

SECTION 2. Chapter 304A, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§304A-____ Dynamic tax modelling. (a) The Economic Research Organization at the University of Hawaii (UHERO) shall develop and maintain a dynamic tax model.

(b) "Dynamic tax model" is defined as "Dynamic" revenue analysis that would allow the consideration of the macroeconomic impact of legislative decisions, including the direct and indirect behavioral responses brought about by those decisions.

(c) Commencing with the regular session of 2016, the Economic Research Organization at the University of Hawaii shall submit an annual report to the legislature not later than twenty days prior to the convening of each regular session, containing the following:

(1) Status updates on any progress that is made with respect to the development of the model;

(2) A detailed explanation of all assumptions that are used to construct the model; and

(3) Any recommendations to the legislature on how dynamic tax revenue estimates can be included as part of the public budgeting process.

(d) Once the dynamic tax modelling system has been developed and tested for accuracy, the Economic Research Organization at the University of Hawaii shall:

(1) Make the model accessible to the legislature and executive, as well as the public at large;

(2) Upon written request by any legislator apply the dynamic tax model to any proposed or existing tax or tax repeal with an anticipated revenue impact of more than fifty million dollars and provide written findings in response within a reasonable time; and

(3) Upon reasonable notice in writing by any legislator or the Legislature provide testimony on any bill that proposes any tax or tax repeal with an anticipated revenue impact of more than fifty million dollars; however nothing in this subsection shall prohibit or limit testimony to be given at the discretion of the Economic Research Organization at the University of Hawaii.

SECTION 3. There is appropriated out of the general revenues of the State of Hawaii the sum of $150,000 or so much thereof as may be necessary for fiscal year 2015-2016 and the same sum or so much thereof as may be necessary for fiscal year 2016-2017 for the economic research organization at the University of Hawaii to construct and maintain a dynamic tax modelling system.

The sums appropriated shall be expended by the University of Hawaii for the purpose of this Act.

SECTION 3. This Act shall take effect on July 1, 2015.

INTRODUCED BY:	_____________________________