Some worry that tax hikes might deter docs from transferring to the state

A government bill that would increase taxes on the high-income could stall, but it could still have a negative impact on the state’s medical shortage.

Senate Bill 56 was introduced this legislature to generate additional revenue for the state after the COVID-19 pandemic ran a budget deficit of $ 2 billion. To avoid vacation days or layoffs for government employees, the bill proposed a series of increases in income tax for high earners, capital gains tax, corporate income tax, and transportation taxes.

Under the measure, those earning US $ 200,000 or more per year would have their income tax rate increased from 11% to 16% starting this year. If approved, it would be the highest income tax rate in the nation.

While the bill was largely popular with testers at the Senate committee hearing earlier this month, which was passed unanimously, some were concerned about the potential of the legislation to dissuade doctors from moving into the state, exacerbating an already critical medical shortage.

Hilo radiologist Scott Grosskreutz, who helped set up a Hawaii Physician Shortage Crisis Task Force to work with state lawyers on the matter, said Hawaii County has an estimated 53% fewer doctors than similar sized communities on the mainland.

In addition, more than a third of doctors in the county are 65 years or older, which means many will soon be retiring and leaving the county in an even worse situation.

A bill that would levy taxes on a doctor’s salary would simply discourage more doctors from traveling here and could force some doctors to leave, Grosskreutz said.

“It seems as if there is (in the legislation) no good understanding of how doctors are trained,” said Grosskreutz. “You’re foregoing 10 years of medical school employment, residencies, and grants. So you enter the job market in your thirties, have $ 250,000 in student debt, and then have to pay to move to and settle in Hawaii.”

Lisa Rantz, president of the Hawaii Rural Health Association and executive director of the Hilo Medical Center Foundation, said a doctor in Hawaii can expect an income comparable to that of a doctor in Hawaii because general practitioners are not exempt from general excise tax in rural Ohio, while also dealing with much higher cost of living.

“There was a doctor who told me if this happened they would just have to get out of the state,” said Rantz.

While the majority of the test subjects on the Senate Pathways and Means Committee earlier this month supported the bill – with most referring to the bill as a means of supporting one or the other critical government program – others opposed it when it did not, as this could worsen the draft legislation.

The biggest opposition was against the provision of the Bill to Increase Transportation Tax on Property Sales for $ 1 million or more. But others, like the Hawaii Food Industry Association, opposed the bill because it could cripple the recovery of local businesses from the pandemic.

Regardless of receipt of the bill, Rantz and Grosskreutz believe SB56 is doomed: while the bill only had to go through a single committee in the Senate, it has since been referred to four separate committees in the house.

The bill has to go through at least three of these committees by the end of next week, but none of them are scheduled to be heard.

But even if the bill is dead, it could have already done damage, said Grosskreutz.

The measure hit the headlines and generated headlines after its inception in national publications – “The Hawaii Senate Approves the Nation’s Highest Income Tax Rate,” was the headline of an article on US news and world reports last week – that caught the attention of Drew doctors across the country.

“They saw that it was something the state was trying to do,” said Grosskreutz. “And even if that bill is dead, guidelines can be re-introduced into other bills later.”

Email Michael Brestovansky at [email protected].