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Don’t Confuse Incentives With Tax Relief

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As the much touted economic summit garners more attention, it appears that some of the spotlight will be turned on the tax arena as a possible avenue to “jump start” the economy. And why shouldn’t taxes be a target of policymakers’ attention – after all Hawaii residents rank in the top four spots in per capita tax [and fee] burden.

 STATE & LOCAL GOV’T
PER CAPITA TAX & FEE
BURDEN IN FY 1994
 1. Dist. of Col. $4,604
 2. New York  4,579
 3. Alaska 4,298
 4. HAWAII 3,950
 5. Connecticut 3,853
* * *
11. Washington 3,337
* * *
U.S. Average 3,033
* * *
39. Idaho 2,559

Source: Census Bureau

However, if the track record of lawmakers is any indication, both public and private officials will clamor for the popular and more glamorous of the ideas that will set off bells and whistles in the media. Instead of truly looking at tax relief for everyone, there will be the temptation to chase the most appealing of ideas, tax incentives.

We heard it before and seen it before. Why, just this past session the administration proposed and got the legislature to go along with tax incentives for hotel renovations, motion picture producers, and aircraft maintenance activities. And there has been no shortage of tax incentive proposals in the past. Perhaps the most enticing is a tax credit or tax exemption for high technology firms. The idea of Microsoft or Micron relocating to Hawaii sure has a lot of appeal.

But are tax incentives really the best medicine for Hawaii’s economy? So we take care of this or that industry, what about the rest of the businesses in the community or who might want to relocate to Hawaii. What about the workers in companies who aren’t granted a tax break? What about all of the other taxpayers, both businesses and individuals, who will have to continue to pay for the services that the favored business and its employees will continue to use?

Hey, everyone knows that Hawaii’s businesses and families already suffer from one of the highest tax burdens. And to a large degree, a “tax incentive” or “tax break” to attract new businesses to Hawaii is nothing more than an indictment that Hawaii’s taxes are too high for everyone. So why not address the problem for everyone?

While tax incentives for high tech companies or stock markets may have political appeal, the real truth of the matter is that all taxpayers are laboring under a heavy burden of taxes. So why not reduce taxes for everyone across the board? And why haven’t lawmakers done so?

Lower taxes mean less dollars to spend [on government programs]. Less spending means less programs and possibly less employees. Less employees means less people who are apt to respond to reelection campaigns as public workers. But wait, whose money is it that lawmakers like to spend? Why, of course, those are tax dollars that we are required to give up.

It seems that if lawmakers want to get reelected, they just might want to pay a little bit more attention to those people who pay for the spending they like to do. Adopting tax incentives in the name of “jump starting the economy” at the expense of other taxpayers is nothing more than “spending” at the expense of all other taxpayers.

If lawmakers want to do something “good” for the economy, let’s start talking about lowering taxes for all taxpayers and not just to make elected officials look “good.”

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