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Looking for Solutions to the Bad Economy

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By Lowell L. Kalapa

     With the campaign season going hot and heavy, there are accusations going back and forth between candidates about who did this or that and you know what — it is beginning to get very tired.

The essential question to ask is who was or would be willing to raise taxes just to keep government going. That is the essence of the debate. Given where we have been, that is the land of feast and excess of the late 1980’s to the land of famine, raising taxes seems more like an insult rather than a solution. Yet in the last year, not only elected officials but leaders of labor as well as of business were ready and willing to raise taxes to “jump start” the economy.

While voters may not have any voice in who heads the business or labor communities, they certainly has a voice in who leads our government. Is it too harsh to point the finger at those who tried to solve the economic problems by raising taxes? Well, if you think about it, what if the Japanese government beset with even worse economic problems suggested that income taxes be cut to stimulate the economy, but in order to make up the revenue loss, sales taxes should be raised?

Would the financial world stand up and applaud? Probably not, in fact, the financial world would more than likely chuckle if not laugh outright. So why would such a proposal be good for Hawaii? Indeed, when elected officials took the plan to the bond rating people in San Francisco, the bond people all but laughed at the idea.

So is this the kind of leadership and direction that Hawaii needs? The alternative to raising taxes is cutting spending. While neither decision is easy, the question is what does each of those alternatives represent. Raising taxes obviously means that you and I are being asked to part with more of our paycheck to keep government going. On the other hand, cutting spending represents less money for elected officials to spend, less people on the public payroll, and less patronage to hand out in jobs and contracts.

So yes, either alternative is difficult for elected officials. On one hand, raising taxes offends taxpayers while cutting spending offends those who feed at the public trough. The track record of the last few years indicates that those in office find it easier to offend the taxpayers than to offend those who feed at the public trough.

The problem with that scene is that more and more “feed” is needed to fill the public trough. What we have found out is that putting more “feed” into the public trough takes away what can be invested in the economy. And that is the problem that besets the Hawaiian economy.

Some will argue that the burden of taxes is not the problem with the economy, that in fact, Hawaii is the victim of the world economy. If that is the case, why are all the other states continuing to enjoy robust growth and Hawaii is not? Certainly the numbers of eastbound visitors are not coming in the droves that they once did, but is it only the visitor arrivals or is it the fact that Hawaii has lost its shine as far as a place to invest and do business?

One only has to look back at the last ten to fifteen years to see how inch by inch lawmakers and other elected officials have heaped taxes upon taxes and when that possibility ran out, they resorted to user fees and charges. To make matters even worse, new and costly regulations were heaped upon businesses. The most recent example is the annual elevator and boiler inspection which now must be performed every six months.

While elected officials will proudly point out that they didn’t raise the general excise tax and in fact this year lowered income taxes, just take a look back and see how elected officials have added to the tax burden in Hawaii. The transient accommodations tax or hotel room tax became a reality, the conveyance tax was doubled, a new tax was imposed on all petroleum products imported into the state, the liquor tax was steadily increased and the cigarette tax was pegged at the highest rate in the nation. At the same time, fees such as those for marriage licenses, business registrations and even a certificate of divorce were substantially increased. All of these increases have occurred over the last 12 years. So is it any wonder that Hawaii is having a difficult time attracting people to invest or for that matter even visit Hawaii? Is it any wonder that we have “priced” ourselves out of the market and out of a robust economy?

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