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The following is excerpted from a paper dated November, 1960 in the Foundation’s files.

 

BACKGROUND MATERIAL ON RELATIONSHIP OF TAX FOUNDATION OF HAWAII TO CHAMBER OF COMMERCE OF HONOLULU

First Attempts To Organize

One of the first efforts to establish an organization to carry out similar functions of the present Tax Foundation of Hawaii was the Hawaii Bureau of Governmental Research formed in 1929. The organization was disbanded in 1939. It is recorded that the bureau became involved in lobbying and had poor relations with the legislatures and governmental officials.

In 1937, a Citizens Committee of Public Finance organized. The Committee was supported at the start by subscriptions by the business community. The committee cooperated closely with the Legislative Committee of the Chamber, and its offices were located within the Chamber of Commerce. This committee became identified, in the mind of the public, as a Chamber of Commerce committee.

When the Business Legislative Committee of the Chamber of Commerce terminated its activities in 1947, it recommended, among other things, that permanent facilities for a study of tax matters be provided.

A memorandum was prepared at the request of the Public Finance Committee toward this purpose, which was discussed with the Chamber Officers and submitted to and adopted in principal [sic] by the Chamber of Commerce directors. The report proposed the organization of a Tax Research Division of the Chamber, with an annual budget of from $36,000 to $40,000. A start was made, but changes in staff personnel prevented real accomplishment. The Committee decided to review the organizational setup and objectives, seeking expert advice for these purposes.

Dr. Roy E. Brown of the Tax Foundation of New York was retained by the Tax Study Committee to appraise the local situation and recommend a plan for future action. He recommended that the then existing arrangements of a Tax Study Committee of the Chamber, consisting of 20 to 25 members, be continued on a trial basis, a small executive committee be appointed, a staff consisting of a director, two research assistants, with stenographic help, and a budget of about $39,000, not including rent. The recommendations contained in Dr. Brown’s report were approved and adopted by the Chamber and by the HSPA [Hawaiian Sugar Planters’ Association] and PGA [Pineapple Growers’ Association], the other supporting groups. Dr. Brown was offered the position as Director. The budget for the first full year of operation was $42,000.

Separation From The Chamber

A Chamber Survey Committee, chairman G. W. Sumner, was appointed in 1952 to review the functions and organization of the Chamber. This Committee recommended, among other things, that the functions of the Tax Study Committee be separated from the Chamber of Commerce, but continue to receive the same support from the Chamber, sugar and pineapple.

As part of this program, a subcommittee reporting to the Survey Committee was appointed to review the organization of the Tax Study Committee. The Chairman of this subcommittee was Boyd MacNaughton. On the committee were two members representing sugar, one representing pineapple, one representing utilities, and seven representing the Chamber of Commerce. The subcommittee’s report which was approved by the Survey Committee of the Chamber, by the Chamber Directors and by the other sponsors of the Tax Study Committee, contained the following recommendations (Dated November, 1953):

General Objectives – It was agreed to recommend that the name of the organization be changed from Tax Study Committee to Tax Foundation of Hawaii. The committee recommended that the general objectives of the new organization continue along the same general pattern followed by the Tax Study Committee; that the major purpose should be to make studies of both the administration of governmental agencies and taxes. Based on these studies, the Tax Foundation of Hawaii will make recommendations leading to a more equitable tax structure and greater economy in government operation. As in the past, such recommendations in no way obligate those contributing to the financial support of the organization. The Foundation will be concerned with government at all levels – federal, territorial and county.

“The Foundation will issue at regular intervals a publication dealing primarily with current tax and administrative problems of the Territory. Special reports of a more detailed nature, dealing with research projects, will be issued to the members of the organization, and to public officials and other groups or individuals interested in the field of public administration. It is a major objective of the Foundation to inform the people on the problems and activities of government – through publications, speeches by the staff and members of the Board, radio, television, and news stories.

“The Foundation will take no part in politics. It will make its research and recommendations available to interested persons or groups who in turn may attempt to secure their adoption.

Financing – It is the recommendation of the committee that with some minor modifications the financing remain, for the present, basically as now exists in the Tax Study Committee – that four contributors (Chamber of Commerce, Sugar, Pineapple and Utilities) be requested to underwrite a percentage of the budget recommended each year by representatives of the sustaining members. For 1953, the Chamber of Commerce contributed 5/11; Sugar 3/11; Pineapple 2/11; and Utilities 1/11. The Committee recommends that other organized groups be encouraged to underwrite a portion of the budget. Such income as may be collected from other members or other sources will be used to decrease the amount subscribed by the underwriting members and not increase the annual budget of the Tax Foundation of Hawaii. It is not expected that new underwriters to the Tax Foundation of Hawaii will contribute at the expense of their current contribution to the Chamber.”

Steps were immediately taken to implement the subcommittee’s report. Articles of Association and By-Laws were prepared and the Tax Foundation of Hawaii was chartered by the Territory on December 27, 1953.

Financial support for the Foundation for the 1954 calendar year was secured as follows:

Chamber of Commerce $21,142
 HSPA  13,878
 PGA  9,252
 Utilities  4,602
 $48,874

Review of 1955

In considering the proposed 1955 budget of the Tax Foundation, the Chamber Board at its January 17, 1955 meeting approved a contribution of $16,500 as against the previous underwriting portion of 5/11ths which would have amounted to $22,235. At the same time, the Chamber Board requested that the status of the Chamber be changed from underwriter to subscriber.

Special committees in both the Chamber and in the Foundation reviewed the relationship of the Tax Foundation to the Chamber and both organizations through committees issued reports. The findings and recommendations of the report from the Review Committee of the Tax Foundation were as follows:

Basic Objectives – In view of the recent economic, political and social developments in Hawaii the purposes of the Foundation are now even more valid than before and are worthy of the wholehearted support and in particular the financial support by the business community. The underlying philosophy of the organization is sound, and we as businessmen should be able to wholeheartedly subscribe to it.

Membership and Financial Support – The membership provisions of the Articles of Incorporation are consistent with the underlying philosophy and purposes of the Tax Foundation. Since the control and management of the Foundation is lodged in the hands of the underwriting members, and since the Chamber of Commerce represents a large segment of the business community not represented by the other underwriting members and does subscribe to the purposes and philosophy of the Foundation, making a substantial contribution as an associate member, it would be desirable and proper for the Chamber to return to the status of underwriting member. It is further recommended, for reasons discussed below, that the basic financial support be provided by a relatively small group of major business interests.

Control and Manaqement – The organization of the Tax Foundation is reasonably adequate to accomplish its purposes and objectives. The function of the Trustees should be to direct the policy of the Foundation, bringing to it the thinking of the respective organizations they represent and taking back to those organizations the factual data, arguments and conclusions developed through the work of the Foundation.

Activities of the Tax Foundation – The activities of the Foundation have been generally effective in promoting the objectives of the organization and have been consistent with its underlying philosophy. The educational media of the Foundation can and should be improved and expanded, with public relations counsel made available to the Foundation’s staff initially on a retainer basis.”

The above findings and recommendations contained in the report of the Review Committee composed of Messrs. M. Cades, H. C. Eichelberger, Ralph B. Johnson, T. Hitch, H. W. B. White, J. A. Driver, and G. R. Ewart III were transmitted to the Chamber.

A special committee of the Chamber composed of Messrs. Malcolm MacNaughton, Chairman, Gilbert W. Root, F. B. Herman, J. K. C. Doo, M. L. Theaker, George McLane, J. L. Fuller, R. E. Woolley, George Hogg, W. T. Woodward, H. C. Babbitt, J. H. Tabor, T. G. Singlehurst, and H. C. Eichelberger were asked to review the Tax Foundation report.

The Chamber recommended a policy statement be adopted in order that the Chamber and Tax Foundation operate both harmoniously and effectively in the best interests of the business community concerned.