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Going with Reruns Not Very Creative

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By Lowell L. Kalapa


A caller asked the other day if the Revitalization Task Force tax proposal was indeed the largest tax cut in the history of Hawaii, if not a novel approach to solving the state’s economic problems?
 

 

 
It seems that there is a definite lack of originality in trying to deal with the state’s problems. It seems all our public officials know how to do is to raise taxes as the solution to the problems.
       Starting with the last question first, the idea of using a general excise tax increase to solve problems is not a novel idea. In fact, when the current governor served as the Ways & Means Chairman during the 1980 session, SB 2813-80 would have increased the general excise tax from 4% to 5% and cut the net income tax rate for those in lower income categories while raising the top tax rate to 15%. In the purpose clause of the bill, the Ways & Means Chair justified the proposal as necessary “to provide urgently needed relief to Hawaii’s taxpayers by reforming the tax system.”

Like the current proposal, the 1980 idea was based on the rationale that the tax burden could be shifted from residents to visitors and from low-income to high-income wage earners. The changes only created confusion because instead of cutting taxes across the board, it was an exercise that moved the pea around from shell to shell. The effect was that the overall economy would end up giving up more to government in tax shift.

While that idea did not win approval, the effort to shift tax burden was not dead. Late in 1984, the Governor’s Congress on Tourism searched for a way to secure dedicated funding for visitor promotion as the visitor industry was experiencing one of its periodic slumps. The proposal that came from one of the committees was to increase the general excise tax by half a percent and provide generous tax credits for residents and keep the rest of the money raised by the tax increase. While that proposal did not fly in the 1985 session, it was to rear its ugly head once more.

Again in 1990, in an effort to push the issue of mass transit along, the state administration together with the City came up with an almost identical plan to raise the general excise tax. Only this time, instead of the heat being focused on the legislature, the buck was passed to the counties. While the legislature approved the imposition of the tax increase, they left the final decision up to the county councils. Unfortunately or fortunately, the Honolulu City Council and the Kauai County Council rejected the idea.

Another bid to raise the excise tax was again made in 1995 session, this time to pay off the settlement with the Hawaiian Homes Commission. This time the idea to raise the excise tax to 5% came out of the House leadership. The proposal was to increase the tax rate to 5% for one year to generate enough money to pay off the Hawaiian Homes claims. However, then like now, the skepticism that the tax increase would be “temporary” ran rampant and basically sunk the proposal. Again, thank goodness, there was some common sense left in the legislative arena as many businesses were almost convinced that the tax had to be raised in order to close off the claims and to clear title to lands in Hawaii.

It seems that there is a definite lack of originality in trying to deal with the state’s problems. It seems all our public officials know how to do is to raise taxes as the solution to the problems. And it looks like we are about to be ‘had’ again as the pressure is being put on lawmakers in these final weeks of the session.

Oh, yes, is this the biggest tax cut in the history of Hawaii? Well, everything is relative. Given the fact that taxes have NEVER been cut in the state’s 39 year history, it just might be the only tax cut Hawaii residents will see in their lifetime. Of course, is it really a tax cut when there is a simultaneous increase in the general excise tax? I guess public officials don’t think taxpayers are astute enough to see through the smoke and mirrors.

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