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Shoe Finally Falls as Calls for Tax Increase Are Issued

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By Lowell L. Kalapa

Well, the other shoe has finally dropped in this whole debate over pay increases for public employees as union representatives finally blurted out the other week that in order to fund their pay raises the general excise tax should be increased.
Indeed that was one of the points made by the fact-finding panel in determining what sort of increases could be granted to public employees, that the state always has the ability to raise taxes. Where did this fact-finding panel come from – outer space? Not only did Hawaii taxpayers turn down a 0.5% increase for mass transit in Honolulu and Kauai in 1992, but taxpayers across the state rejected the idea of raising the general excise tax even though it had the backing of the governor and some pretty high-powered community and labor leaders.
Hawaii taxpayers rank third highest in the nation insofar as per capita state and local taxes. If the public employee unions get all of their demands, the state will be in debt to the tune of more than a half billion dollars by the end of the fiscal biennium 2003. Thus, a tax increase would be necessary if: 1) the final settlement is not affordable within the current resources of the state, or 2) lawmakers and the state administration are not able to reduce spending on programs.
It is difficult to believe that the public employee union leaders believe that taxpayers will rollover and support a tax increase when the track record of the past decade indicates that taxpayers are fed up with higher taxes and that high taxes stand in the way of economic recovery. Let’s flip that coin over, is the public employee endorsement of an increase in the general excise tax an indication that the public employees don’t want economic recovery to move forward?
And how does that comport with the complaint that the cost of living is too high in Hawaii when everyone admits that the general excise tax is a key reason for the higher cost of living in Hawaii? Is it a message that reads, raise the tax so that only public employees can cope with the higher cost of living?
While we all would like to be paid more, and who wouldn’t want a pay increase, the issue is whether or not taxpayers are willing to raise taxes just so certain workers can have pay increases? This is the accountability issue that is so key to the operation of a government that depends on the willingness of its taxpayers to support that government operation.
What is even more critical to this discussion is whether or not taxpayers see value in the services being performed. If taxpayers perceive that the services are inefficient, substandard, or even unnecessary, there is little likelihood that they will support shelling out more for what they perceive as a poor return on investment.
And this is where we are now. The perception is that government wastes what resources it has already been given. From the horror stories of mismanagement, misappropriation, and just failures in the system to low test scores, prison escapes, and duplication of effort to generous employee benefits which are forecast to put the state in the red for years to come, taxpayers have had enough.
It is not that taxpayers are being mean and hardhearted but it is the cynicism that has waxed over the years as they discover time and time again how tax dollars are wasted. It is also the realization that as a result of not only the high taxes, but the burgeoning government bureaucracy and red tape that Hawaii is a less than attractive place to do business.
It is the irony of watching lawmakers pass all sorts of tax incentives and tax breaks to attract high technology businesses to Hawaii while perpetuating the maze of permits, licenses, and regulations with which all other businesses must cope. Don’t lawmakers realize that unless they improve the tax and regulatory climate in Hawaii, no amount of tax incentives for high technology is going to improve the overall outlook for the state economy?
Where is the common sense of our leaders? Will they accede to the demands of the public employee unions and raise taxes….and to hell with the economy? Unless taxpayers voice their concerns that is exactly what could happen in the next few weeks. Raising taxes is not the answer if lawmakers are truly committeed to building a future for Hawaii and the economic vitality of this community.

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