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Counting The Numbers Should Be Done With Care

posted in: Weekly Commentary 0
By Lowell L. Kalapa

One of the arguments some state officials are making in defense of the status quo is that comparisons are being made between Hawaii and other states are unfair because apples and oranges are being compared.

Officials argue that Hawaii should not be compared with other states because the structure of state government is unique in that the state is responsible for programs that are usually carried out by local or county governments on the mainland. The programs cited include welfare and education which of course are the state’s most costly programs. In fact, for the first time in the history of the state, expenditures for welfare programs will out pace expenditures for education which has traditionally been the largest program in the amount of dollars spent.

One state cited by state officials as an unfair comparison is the state of Washington which has no state income tax and only a 6.5% sales tax together with a 0.5% business and occupation tax. State officials claim that it is not fair to compare Hawaii with that seemingly tax paradise because local governments in Washington shoulder the heavy burden of education and welfare. And they are right!

But that is not the whole story. Indeed the Tax Foundation [of Hawaii] has consistently preached that in order to make state-by-state comparisons, one must always look at all governments within the political jurisdiction. That’s why a comparison of state and local tax burdens is the more appropriate way of comparing tax burdens or expenditures between states. By using the combined state and local figures, researchers can better assess how one community is doing comparing with another community with respect to the same challenges and opportunities.

Given that assumption, a ranking of the states by per capita tax and fee burden indicates that for the fiscal year 1994, Hawaii ranked the fourth highest after the District of Columbia, New York, and Alaska. The state of Washington ranked eleventh highest in the nation with a per capita tax and fee burden of $3,337. This compares with Hawaii’s per capita tax and fee burden of $3.950.

Well maybe it’s because Washington depends on other sources of income that the tax burden ranking places it below that of Hawaii’s. But that is not the case. The composition of revenues for Washington state is almost like that of Hawaii’s. Hawaii gets 59.7% of its revenues from taxes. Washington state gets 58.2% of its revenues from taxes. So it is not a matter that Washington has a lesser dependency on taxes than Hawaii.

Taking another comparison to heart, it becomes very clear why taxpayers in Hawaii have something which to complain. While state officials may want to cry foul because the state and local government structure is unique, all one has to do is to review the comparison of per capita state and local expenditures. Again, Hawaii ranks fourth highest in the nation behind Alaska, the District of Columbia and New York. It is not surprising to see expenditures parallel revenues.

If there is anything to be made out of all this comparing apples and oranges is that no matter how you slice it, until public expenditures can be controlled, the demand for revenues that those expenditures place on the tax system will consistently rank Hawaii in the stratosphere. It seems that instead of whining over unfair comparisons, state and local government officials need to put some effort into tempering the public propensity for spending hard-earned taxpayers dollars.

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