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Zeal to Help Business Begs Creativity

posted in: Weekly Commentary | 0
By Lowell L. Kalapa

     Despite all the changes made to the income and general excise taxes over the past two years, lawmakers are still talking about further tax changes to help business.

While they say one shouldn’t look a gift horse in the mouth, it is obvious that lawmakers have not put two and two together. Being business’ friend is an enviable position to be in come next year at this time when lawmakers face the ballot box, but if lawmakers continue to give away tax revenues without paying attention to state spending, the people of Hawaii will be in an even more dire situation than they have been for the last nine years.

Predictions of the state running deficit budgets over the next two years and a declining cash balance should motivate lawmakers to find ways to pare spending so the tax cuts they would like to deliver can be afforded. The perfect example of this ignoring of the bottom line is the dilemma lawmakers faced last session when they wanted to adopt a response to the “pyramiding” of the general excise tax but could only accomplish that goal by phasing the solution in over a seven-year period.

Lawmakers found that they could not “afford” to get rid of the “pyramiding” in one fell swoop because state government needed the money to spend to keep programs operating and pay employees. Given this inability to cut spending to accomplish the pyramiding correction, how can lawmakers entertain further tax reductions or tax incentives? It is even rumored that lawmakers and administration officials may suspend the phase-in of the pyramiding correction because they need the money to spend.

So what can lawmakers do to help the taxpayers and the business community in general? Well, the obvious action that needs to be taken is for lawmakers to balance the budget by reducing spending. The other thing lawmakers might mull over is getting government out of the face of business. Instead of enacting new laws, lawmakers should consider repealing some of the existing laws which make it so difficult and costly to do business in Hawaii.

Over the years, lawmakers have added rule after rule with which businesses have had to comply. Adopted in the belief that their constituents need to be protected from unscrupulous businesses, lawmakers paid no attention to how much it costs businesses to adhere to these rules and regulations. Nor did they seem to pay attention to the fact that in order to enforce and monitor compliance with these rules, employees had to be hired.

Some argue that many of these rules and regulations are necessary to protect the customer or make sure the conditions are sanitary or that the environment is not endangered. While the intent is admirable, have lawmakers ever asked how much it will cost to comply with the regulation or how much it will cost to enforce the regulation or whether or not there is a more inexpensive means of accomplishing the same goal?

Advocates of more regulation may argue that there is no price too dear to pay if it save one person or prevents just one environmental disaster. And certainly there is something to be said about protecting customers or the environment, but one has to ask – at what cost? If the regulations are so draconian that it drives entrepreneurs out of business or it increases the cost of the goods or services to the point where the cost is no longer competitive, then that regulation needs to be reexamined.

If a business can produce the same goods or services in another community where the regulatory environment is more friendly, then it would make more sense for the business to move to that community. Regulations imposed by government merely add another cost to doing business, just like taxes.

While lawmakers seem to want to get their “friendly” arms around business by enacting more tax cuts and more tax incentives, they just may want to look at some of those hidden costs imposed by laws they have approved in the past.

Finally, it would be a historic moment to witness lawmakers actually repealing rules and regulations rather than adding more with which business would have to contend and for which customers would have to pay through higher prices.

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