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Yet More Proposals to Raise Taxes

posted in: Weekly Commentary 0
By Lowell L. Kalapa

On the flip side of state tax “give-aways” discussed last week like the Kaiser amendment which was eventually repealed, elected officials think that they can raise taxes any time they please with nary a thought given to the heavy burden of taxes we already pay.
At the state level, the issue of raising taxes revolves around the proposal of giving the counties the power to levy a retail sales tax, an issue left over from the last session. In return for getting the power to levy the sales tax, the counties would have to give up all or part of the revenues they currently realize from the transient accommodations tax or TAT.
While the City and County of Honolulu is eager to get its hands on this taxing power, the Neighbor Island counties have their reservations. The problem is that the Neighbor Island counties do not have the revenue base to support a retail sales tax that would be sufficient to offset the loss of one-half of the TAT revenues they currently receive. So, the Neighbor Island counties tacitly support Honolulu’s grab for the taxing authority.
Meanwhile the state administration has indicated that it might support a tax increase if it is necessary to solve Oahu’s traffic problems. What form that tax increase will take has not been outlined at this point, but many are guessing that it will be a rerun of the transit proposal of the early 1990’s when the counties were given the option of increasing the general excise tax rate. While the general excise tax seems to be the most popular tax to propose raising because politicians think that people won’t see it being paid in a big chunk like the income or property tax, it is probably the worst tax to raise because it is regressive, that is it takes a larger percentage of a poor family’s income than it does of a higher income family.
Not only that, but the general excise tax tends to increase the cost of doing business here in Hawaii which in turn means that the cost of living will also rise. So rather than improving the prospects of living and doing business in Hawaii, an increase will make it all that more difficult to survive. So while our state’s leaders may think raising the general excise to pay for a transit system to solve traffic congestion on Oahu is a good idea, that increase may just help to kill the jobs that those commuters drive to every morning.
Finally at the county level, the Honolulu City Council is considering raising the motor vehicle weight fee for Oahu county by as much as 60% for passenger vehicles and 25% for commercial vehicles. This proposal is supposed to help the City & County pay for recently arbitrated pay increases for police officers, although that is going to take some finagling.
Because the motor vehicle weight tax is dedicated for road or transit use, technically it cannot be used to pay police officers’ salaries. So what the administration has done is to propose that the tax be raised but earmarked for the bus fund which currently receives a subsidy from the county’s general fund. Once the tax is raised and deposited into the bus fund, the subsidy from the general fund can be reduced by a like amount so that the money can be used for police officers’ salaries.
But the bottom line is that elected officials seem to have forgotten the message voters sent last year – that taxes are already too high in Hawaii.
What happened to the idea that voters want a leaner government in Hawaii or is it business as usual? Instead of setting priorities for what tax dollars we are already asked to forgo from our paychecks and on our grocery bills, it appears that elected officials believe that taxpayers should pay for even more government. What happened to the idea of living within our means and ability to pay for government?
Will, in fact, lawmakers enact any or all of these tax increases? Actually elected officials don’t see these proposals as tax increases and perhaps that is the problem. At a recent hearing on the measure allowing the counties to impose a 1% retail sales tax, the proposal was characterized as “homerule.” Allowing the counties to “determine their own destinies” was the phrase of the day.
No mention was made of the fact that this would raise the tax burden of taxpayers in Hawaii. And only once was the promise made that county officials would lower real property taxes. Perhaps lawmakers should hold county officials to that promise by requiring that real property taxes be lowered on a dollar-for-dollar basis if the retail sales tax is imposed by the county.

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