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Quest for Tax Relief Falls Far Short

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By Lowell L. Kalapa

     So have you been keeping your eye on the bouncing ball or on the shell that has the pea under it? Watch carefully now, because if you blink you will miss it!

And that is what will happen if you believe all that tax relief rhetoric that is coming out of the fifth floor of the state capitol building where the Governor resides. What wonderful news greeted taxpayers as proposal after proposal to enact tax cuts and tax incentives were forded in the State of the State message. However, many legislative observers were left scratching their heads trying to figure out how the administration was going to pay for these wonderful tax cuts and tax credits.

But that answer has come all too soon. Buried deep in the stack of bill submitted by the administration is the answer to that problem. Now watch the bouncing ball. First, the administration proposes to increase the $2 per day rental car fee to $3. But instead of leaving the receipts of that fee in the state highway fund, the administration proposes to move it permanently to the state general fund.

Hooray, you say. After all, isn’t that tax just for visitors? Oops, did you forget that the last time you “went holo holo” to see tutu on Oahu you had to rent a car? Well anyway, it will help lawmakers balance the budget without cutting too many state programs.

But what about the state highway fund? Doesn’t it need to fill the “puka” left by taking away the rental car fee? Never fear, the administration has an answer. Levy a new tax and call it a “county” vehicle tax which will be equal to 1% of the value of your car. The tax won’t apply to commercial vehicles like rental cars, trucks, taxis and the like and it will apply only if your car is less than ten years old.

Although the exemptions for commercial vehicles might reflect sensitivity to charges that the business climate needs improvement, the same can’t be said about taxing only newer cars, after all what will the new car dealers have to say about this idea? Will the exemption of older vehicles actually encourage people to hang on to their cars rather than buy a new one?

And just how much will the tax be? Well, one percent of a $20,000 car on the show room floor will add another $200 to your annual motor vehicle registration bill. And this new tax indeed will be in addition to all the taxes you currently pay on your car.

What is even more ironic is that although the new tax is named the “county vehicle tax,” the state will take a cut of the collections. Under the proposal, the county gets to keep an unspecified percentage of the collections with the rest going to the state, some of which (an unspecified dollar amount) will go into the highway fund and the rest will go into the general fund.

Now are you paying attention to the bouncing ball or that pea under the shell? The state administration is proposing that a highway fund resource be given to the general fund and in turn a new tax be imposed on motorists to replace those lost revenues to the highway fund and, oh yes, as an added measure, any excess revenues will go to the state general fund. Thus, motorists will be asked to pay for education, welfare, and prisons.

And the new taxes don’t stop there! Just for good measure, if you sell your old car to your next door neighbor, you will be subject to a new 4% tax on that transaction. Or if you purchase a used car from a mainland dealer, you will be subject not only to the new 4% tax but also to another 4% tax under the use tax law because you purchased the car out of state.

And what does the administration have to say about these tax increases? The response is that you just can’t cut taxes without thinking about all the public services the community needs.

So much for improving the economic climate in Hawaii. With all of these shenanigans, it is no wonder that people don’t trust their elected officials. If elected officials can’t cut state spending, just be honest and say they can’t or don’t want to cut state spending. There is little sense in moving all those shells around to make people think taxes are being cut only to take it back in a new or increased tax.

Oh yes, were you watching the bouncing ball closely? Remember that money from the income tax cuts we are supposed to get in the next four years, it just went poof! And now it’s gone.

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