Capitol Matters: Food & Ag Updates from the 2021 Legislature
An irregular series of missives zoomed in on Hawai‘i’s agriculture and food legislative happenings
Distance only testimony kicked off this week with relatively few technological issues, excepting of course for expectable user errors.
SB341 – Taro Production Tax Exemption
Establishes an exemption from state income tax for the first $100,000 of income derived from taro, taro products, and land used to produce taro if the total amount of land used to cultivate taro in Hawaii does not exceed thirty thousand acres at any point in the year.
SB341 passed with modifications that expand the list of taro products covered, amends definition and language, and now includes taro products using taro from out of the state.
SB478 Farming Income Tax Exclusion
Creates an exclusion from income tax for the lesser of a percentage of gross annual income or an amount of gross annual income earned by a farmer from farming activities.
SB478 passed with modifications to the definitions of farmer and farm products, adding items like bioenergy crops. Removed the distinction of only covering producers who are selling goods within the state.
SB496 Agricultural Imports Replacement Task Force & Income Tax Credit
Establishes a task force to identify the top ten fruits or vegetables that are imported into the State but may be commercially grown in the State. Creates an income tax credit to incentivize the production of those fruits or vegetables to obviate the need to import them into the State.
SB496 passed with additions to the taskforce to include member of each county’s Office of Economic Development (or similar) a member of the Hawaii Farmers Union United, and a member from a food hub type local food distribution organization.
Some positive ways forward in general, but each bill still will hopefully become better defined during their Ways and Means (WAM) committee hearings.
For additional info on the bills and their impacts or issues, my testimony, stripped of opening and closing formalisms, for each is below.
SB341 – Taro Tax Credit
Kalo has sustained the Hawaiian islands for generations and the support for its production in SB341 is a long overdue means to unencumber cultural practices, enhance agricultural development, and increase availability of this staple crop.
SB341 is an important means to support statewide goals to increase both local food production and consumption. Having worked lo?i and at a poi mill I support this bill as a means for farmers and value-added operations to retain as much of their hard-earned incomes as possible. As a food system planner with a moderate poi habit I strongly support SB341 as a means to lower the cost of accessing Hawai?i’s staple. Access to culturally appropriate foods is a key facet of food security, and there is no crop better suited for this type of support than kalo.
SB478: Farming Income Tax Exclusion
Aloha Chair Gabbard, Vice Chair Nishihara, and Members of the Committee on Agriculture and Environment,
SB478 is a powerful tax tool to support agriculture in Hawaii but considerable potential for rent-seeking behavior. I support the intent of SB478, and offer the following comments:
‘Farming activities’ are referenced by not defined, ‘Farm products’ are defined but not referenced.
The definition of a farmer will use a percentage of annual gross income. This metric may not be the ideal means to determine producers. As examples, a producer may have a bad year and drop below a certain threshold, alternatively an operator of multiple businesses may have a productive farm operation but overall be below the income percentage threshold. In either case income exclusion eligibility may not be met by using a simple percentage meric.
Secondly, the broad definition of a farmer as one who earns X% of income from the sale of value added products potentially opens this statute from excluding food manufacturers, which is better addressed in SB497.
Finally, the farmer definition includes wording towards the parameter that goods be sold within the state. This laudable goal likely requires a far more robust tax classification system to identify the sales outlet of farm products.
SB496: Agricultural Imports Replacement Task Force & Income Tax Credit
During 2016, HDOA produced reports on top imports by weight (http://hdoa.hawaii.gov/add/main/top10imports/) which provide a ready means to understand viable crops for import substitution. Of the 23 crops appearing in top monthly imports (apple, avocado, banana, bell pepper, berries, broccoli, cabbage, carrot, cherries, cucumber, grape, lettuce, mango, melon, mushrooms, onion, orange, peppers, potato, roots, spinach, squash, and tomato) most are already produced in the islands, while some others are not well suited to our climate. This listing may somewhat obviate the need for a task force.
Should a task force be formed it should include a member of the Hawaii Farmers Union United and a member from the local food distribution industry (i.e., a food hub).
Finally, this form of subsidy should not be a blanket for any organization that produces a heavily imported good, instead it should be targeted to diversify beneficiaries of state subsidy and facilitate more agricultural livelihoods by bringing producers at the margins of the marketplace into greater production. Without careful targeting the state risks subsidizing well capitalized operations just because of the crop they happen to produce.
More hearing are coming up this week, and soon my annual update of a hacked together bill tracker will be ready to share.