Simplicity: Taxpayers should be able to understand the laws they are required to follow. Complicated tax rules make compliance more difficult and costly for both taxpayers and the government.
Fairness: Taxpayers in similar situations should be treated equally.
Neutrality: The tax system should not favor certain industries, activities, or products. Business and economic decisions should not be driven by tax laws. Taxes should be used to raise needed revenue, not to micromanage the economy.
Broad Base and Low Rates: When the principle of neutrality is respected, there should be very few specific exemptions, deductions, credits and exclusions. When such tax preferences are few, substantial revenue can be raised with low tax rates, resulting in an efficient tax system generating adequate revenues at a minimal cost.
Transparency: Taxpayers should understand what they are paying and what they are getting. Both taxes and government expenditures should be handled in a way that is clear and transparent.
No More Than Necessary: Taxes should be imposed at the minimum level necessary to adequately fund government services. High state and local taxes are a disincentive to invest in Hawaii and can drive businesses and residents away.
Control Expenditures: The constitutional mandate limiting general fund expenditures should be respected. Creating “special funds” should not be used as a way around this constitutional limit.
Stability: Frequent changes in tax laws make both personal financial and business planning more difficult and discourage long-term investment. Lawmakers should aim for stability and predictability in tax laws.
No Retroactivity: As a corollary to the principle of stability, retroactive changes to tax laws should be avoided. Taxpayers should be able to rely with confidence on the law as it exists when contracts are signed and transactions made.