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Can’t Seem to Break That Addiction

posted in: Weekly Commentary 0
By Lowell L. Kalapa

It almost seems to beg an “I told you so,” but that would be too easy to let government officials off the hook with a mere slap on the wrist, especially when it comes to raising taxes.

Until late last week, tax increases and new taxes were on the administration’s agenda for this coming session. Don’t mind the fact that just two short years ago this is the same administration that proudly preened its feathers in parading the largest tax cut in the history of the state. And don’t forget this is the very administration that believed a tax reduction was necessary to “jump start” the economy.

However, until a reporter discovered that the state is now predicting a substantial increase in the surplus in three years, the administration was about to propose an increase in the rental car tax (which just went up by a buck last September), a new tax on the sale of used cars by individuals, an increase in the liquor tax and a repeal of the tax credit granted to local insurance companies. Although it seems that the embarrassing news that the state may end up with a substantial surplus after all sent administration official scrambling to pull back tax increase proposals. However, taxpayers should be just as concerned that officials would even think about raising taxes in the face of the fact that it was these very officials whom just two short years ago pranced about touting the largest tax cut in the history of the state.

What taxpayers should recognize is that the so-called tax cut was nothing more than a tax shift. In this case from a broad-based tax of the personal income tax to specific taxes on certain products like alcoholic beverages, used cars, and insurance and services like the rental of motor vehicles.

Why, you may ask, is it necessary to adopt these tax increases and new taxes when only a few years ago tax cuts were viewed as critical to rescuing the economy? If nothing else, these proposals are a reflection of the lack of sincerity and commitment to the ideal that a reduction in tax burden is necessary to improve the outlook for the state. Could it be that the move to cut taxes was nothing more than a politically motivated effort?

More importantly, taxpayers should be concerned that before the surprise surplus was discovered last week, government officials thought it was necessary to raise new taxes and therefore more revenues. What happened to the commitment to “right-size” government? If public officials are looking for more money, then where is the commitment to make do with what they have and deal with the spending side of the problem?

Unfortunately, elected officials and public bureaucrats are addicted to spending taxpayer dollars. Now that there is a substantial surplus predicted, elected officials don’t have to sweat raising new taxes. On the other hand, they will continue getting their high by spending every single dollar that comes into the public coffers. This is not good because it is continuing this sickness that got our state into trouble in the first place.

If there is to be any future for Hawaii and its people, then government needs to return to its proper relationship with respect to the economy as a whole. Oh, don’t get the wrong idea, it is not that we don’t need government as much as government should not overshadow the rest of the economy. There is an appropriate role that government plays in the economy. When government’s role grows larger than the economy can support, government becomes a hindrance rather than a help. The economy ends up working to support government rather than government working to support the economy.

If the whole idea of reducing the personal income tax a couple of years ago was to put money back into people’s hands and therefore back into the economy, then what does taking money out of the economy in the form of higher taxes on alcoholic beverages and sales of used cars do the economy? A dollar collected by government is a dollar collected by government. It is one less dollar in the economy, it is one less dollar in the tip for the waiter, one less dollar in the small mom and pop store selling a six-pack of beer, or one less dollar from the sale of your used car.

So much for tax relief. If government loses the momentum to right-size its operations this year, then taxpayers can bet that public officials will be back in future years to ask for increased taxes and fees. We, as a people, cannot allow our elected officials to continue to rob the economic engine of what fuel it needs to move forward. If nothing else, taxpayers should question the genuineness of those tax cuts touted as the largest tax cut in the history of the state if it was nothing more the a tax shift – a shell game if you will.

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