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Giving Back What Was Taken Away in the First Place

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By Lowell L. Kalapa

So much for public input. The Economic Revitalization Task Force told us they wanted our input, our comments, our suggestions and they asked that we come out and share our ideas with them.

And share we did. You, the community that our public officials are elected to represent, told the task force that taxes are too high, that the cost of living in paradise is too high. You told them that the people of Hawaii need tax relief. You also told the Task Force that an increase in the state’s general excise tax was unacceptable. Over and over, the community from “Hilo to Hanalei” told the Task Force that you didn’t want any increase in the general excise tax.

So much for public input. No wonder there is so much cynicism about government. The message was loud and clear – no tax increases. And what did the Task Force promptly do? They ignored the community. They turned around and decided that they knew better. If there is anything worse than the suggestion that taxes be increased, it is the arrogance of ignoring the wishes of the people. But then again this is what the electorate has come to expect of elected officials.

We are told that once we are “educated” about the plan, we will support it. But what is there to learn or understand? Are we supposed to feel fortunate that the proposal “shifts” the tax burden to visitors by lowering income taxes on residents while raising the general excise taxes which visitors also pay? Did anyone mention that Hawaii residents should have had their income tax rates reduced when the state adopted the federal changes that included more income in the tax base back in 1986? But instead of lowering rates, state officials gave resident taxpayers a “Food Tax Credit” (maybe that should have been Fool’s) to offset the base broadening effects of the federal changes.

Half of that “Food Tax Credit” was taken back in 1995 with the net effect of an across the board tax increase on all taxpayers. Now the Task Force, led by administration and legislative leaders, would like us to believe that we should be grateful that income tax rates are being lowered, that in order to accomplish that goal, the general excise tax rate should be increased. They should give back what they took in the first place.

Did Task Force members also ignore the fact that every Tax Review Commission called for an adjustment in income tax rates and brackets? While taxes are overly burdensome and tax rates are indeed long overdue for adjustment, the real problem is the size of government that those taxes are expected to support.

Supporters of the Task Force recommendations, as well as some lawmakers, squeal that it would be irresponsible to just “slash and burn” government services and therefore the need to make up the revenues lost as a result of lowering income tax rates. Well, our elected officials have known about the spending problem for at least the last three years when the current administration “discovered” the shortfall.

While there were “dramatic” reductions in state programs and spending that first year, it seems that elected officials have been holding their breath for a turn around in the economy to bail them out. Now that it seems that there will be no magical solution to save elected officials. Thus, the need to toss something out there to “save” the economy.

The point that seems to have been lost on the Task Force is that the level of dollars being taken out of the economy, regardless of whether it is coming out of residents’ pockets or the visitors’ pockets, is the problem. So what if the visitor pays those dollars or the resident? It is that many less dollars in the economy. If more is taken in taxes, then it’s that many less dollars spent on goods and services regardless of whether the purchaser is a resident or a visitor.

Hopefully, by the time this package reaches the legislature, lawmakers will have heard from their constituents. Enough of the smoke and mirrors, let’s get on with the real problem of government, its size.

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