Lots Of Tax Increases In Recent Years

By Lowell L. Kalapa
(Released on 12/31/06)

As we begin this new year, we should remind our elected officials that while they may take credit for some of the income tax reductions you will see in your paycheck this year, they are also responsible for substantial increases in your tax burden over the past decade. 

Although those increases may not have been substantial in and of themselves, like the income tax rate reductions they blessed us with in 1998 or the bracket widening they adopted last year, those increases, nonetheless, have added collectively to a substantial burden. Of course, the most glaring hike in taxes is the half-percent county surcharge to fund mass transit on Oahu. Although Honolulu residents will bear the direct burden, Neighbor Islanders will feel the pinch as well since the cost of goods and services purchased on the Neighbor Islands will carry the cost of the county surcharge embedded in shelf prices. Conservative estimates place the first year's price tag in the neighborhood of $150 million. Others believe that the annual price tag will soar to well over $200 million per year. From an economic point of view, that is $200 million taken out of the lifeblood of the state's economy. It is that much less money that consumers will have to spend and that much less income for businesses in Hawaii. 

Then there are the subtle tax increases that hit some, but not all, taxpayers. For example, the conveyance tax that was initially bumped up in the early 1990's, the increase of which was earmarked for affordable rental housing and the state's natural area reserve program. Then a couple of years ago lawmakers believing that only speculators and out-of- state buyers were purchasing property worth more than $600,000 hiked the conveyance tax for all property exceeding that threshold. They went one step further by adopting much higher rates for residential property that was being purchased for nonowner occupant use. 

What is uniformed and disingenuous is the fact that rental properties are residences that are purchased for nonowner occupied use. Thus, the message being sent by lawmakers is that investors should not purchase property that they are not going to occupy, further shrinking the inventory of rentals in the community. 

What is even more insulting to those searching for affordable housing is the fact that lawmakers earmarked 10% of the proceeds of this latest hike in the conveyance tax for land conservation. 

Preying on the emotional heartstrings of taxpayers, lawmakers increased the motor vehicle registration fee by $5 and earmarked this increase for the emergency medical services special fund to supplement the emergency medical system. At the time lawmakers adopted this increase, it was argued that automobile accidents impose a heavy burden on the emergency medical system and, therefore, highway users should be asked to pay for this service. Little did lawmakers acknowledge that the emergency medical system is called upon to provide services to hikers, swimmers, hang gliders or even visitors who may or may not rent a vehicle. 

Then there are the tax increases that are adopted in the disguise of fees imposed on users of specific services or products. For example, a couple of years ago lawmakers decided that emergency response providers should be able to locate a caller using a wireless or cellular telephone instrument. Emergency response providers already had the ability to trace or locate a landline telephone call, but such is not the case with wireless communications instruments. So lawmakers decided to impose a "manini" monthly surcharge on all cellular customers of 66 cents to pay for what they call an enhanced "911" system that would allow emergency response providers to pinpoint the location of a caller. Since that time the program has amassed millions of dollars as a result of this nickel and diming cellular users. However, as consumers recently learned, only about $200,000 of those funds has been spent on building the system. Ah, but this is typical of the legislative "MO" of adopting a tax increase with absolutely no idea of how much a program, or in this case a system, will cost to construct. 

Meanwhile it is consumers who are shortchanged having to do without those millions of dollars that could have been circulating in the economy. The same goes for the infamous "HI-5" bottle deposit fee. Initially adopted to encourage beverage consumers to return the empty containers to reclaim their nickel deposit, this system is so fraught with bureaucratic obstacles that many consumers no longer make the additional effort to reclaim the deposit. As a result, the department of health is sitting on millions of dollars of those nickel deposit fees. Customers may not see their nickel deposit as any significant sum, but when millions of those containers are not returned, they create the largesse that is now clear evidence that the system does not work. 

Taxpayers should not let lawmakers get away with this charade of tax and fee increases but demand that those monies be returned so that they can once more circulate in the economy. 

Lowell L. Kalapa is the president of the Tax Foundation of Hawaii. Mr. Kalapa's commentary is printed each week in the Maui News, West Hawaii Today, Garden Isle News, and the HawaiiReporter.com.

© 2006 Tax Foundation of Hawaii


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