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Other Bits and Pieces Taken from Tax Pie

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By Lowell L. Kalapa

It is truly amazing how jaded people become once they start talking about millions of dollars as if it were just pocket change. As we all know, the most flagrant use or abuse of public tax dollars is all this talk that raising the general excise tax rate by 1% is “just another penny.”
And of course, the state budget involves not just millions of dollars, but billions of dollars in state tax dollars to keep the state machine purring along for the next two years. Thus, it should come as no surprise when both lawmakers and various constituencies throw around figures numbering into the millions of dollars like it was just pocket change.
And advocates for various tax proposals are not above the fray of number tossing. There is $50 million here for tax credits to build a raceway park, or $40 million there for construction tax credits, or $28 million for film makers as the numbers literally run off the tongue of advocates for these proposals. In one hearing what started out as $36 million to be issued in tax credits to guarantee loans though the Hawaii Strategic Development Corporation suddenly became $100 million in tax credits when someone from the technology association said they needed that much in venture capital loans.
Of course advocates pointed out that this wasn’t real money because the tax credits would only be issued if a loan went belly up and the lenders demanded repayment. The tax credits would then be issued to the lenders who could then sell the tax credits to others and recoup the amount of the loan that had been defaulted. Now let’s think about this, the tax credits would be issued to lenders who are holding the bag on a bad loan. The credits could then be sold to recoup the funds. To whom would the credits be sold and how would they be valuable to the purchasers of those tax credits?
Well, tax credits are supposed to reduce one’s tax liability so eventually those tax credits will be used to reduce a taxpayer’s bill and the amount owed the state. The state will never see those revenues and, therefore, some other sucker taxpayer will have to pull some extra weight to pay for the cost of education, welfare, and health services provided by the state. So is it real money? Perhaps not at the discussion stage, but it sure will make a difference to some future legislature trying to grapple with a budget shortfall as revenues lag behind increasing spending demands.
Another proposal that seems to slip by unnoticed is a measure that would insure “clean elections.” Appealing as it sounds, there is a much darker side to this proposal. Sold on the idea that the current system leads elected officials to be “bought” by special interests, this proposal would set up a system of public financing of candidates running for office.
Advocates of the bill estimate it would cost about $3 million to finance legislative races and perhaps another $3 million to fund county races. And where would the money to fund these candidates be found? Buried in the bill is a provision that would earmark a dollar amount of general excise taxes to fill the public financing coffers.
Let’s see now, lawmakers are being asked to approve this bill that would provide tax dollars to pay for campaigns of candidates for public office out of the general excise tax while at the same time approving a measure that would raise the general excise tax rate from 4% to 5% for transit.
While enthusiastic supporters, largely from the University, rallied around the bill, the state’s campaign spending watchdog opposed the measure. He pointed out that the experience in other states is that public financing was literally a target for fraud. In fact he predicted that if the measure passed, he would need more than twice as much money as he currently spends to run his office because of the potential for fraud.
Since many of the witnesses came from the University community, might it be fair to ask that since they want to spend $3 million in general excise tax revenues to fund “clean elections,” would they be willing to support the upcoming increase in tuition? After all, some of the general excise tax revenues they want to spend on clean elections currently subsidize tuition at the University.
Again, it appears that after a while a million dollars just doesn’t seem like a lot until we, as taxpayers, have to fork over more and more in taxes. Have you done your income tax return for this year, and did it pain you to write that check? Hey, that’s real money!

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