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Taking Hawaii’s Economy To A New Level

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By Lowell L. Kalapa

“Happy days are here again” seems to be sounding throughout the halls of businesses throughout the state as visitor counts and visitor expenditures fill the beds and cash registers of the visitor industry.

Meanwhile, across town, contractors are busy building not only new housing inventory for residents to get into a new home, but they are also preoccupied with contracts for the construction and renovation of military housing.

Of course, retailers are smiling as those dollars flow through the economy in the form of increased consumer spending. Things are looking up, so to speak, but it seems like only yesterday when Hawaii was struggling in the deep doldrums of a decade-long slump that was compounded with the aftermath of 9/11. How soon we forget, especially when the economy is in overdrive.

However, before we take that leap into the new sports car, we should stop to think about our economic struggles of the past ten years and figure out what we can do to make sure we avoid a replay of those bad times. Now is the time to make some of those changes that we couldn’t make because we lacked the resources to accomplish those changes.

To start with the obvious, there is still a lot of work to be done to lower the burden of taxes in Hawaii. Some critics charge that this column is biased against a tax increase of any kind. As long as Hawaii ranks the fourth or fifth highest for per capita state and local tax burden in the nation, why would anyone want to add even more burden to the beleaguered taxpayer? To raise taxes on what is an already overburdened taxpayer is like adding gasoline to the fire.

So when lawmakers, the governor, the mayor of the City & County of Honolulu and its city council approve of a hike in the general excise tax rate, the overburdened Hawaii taxpayer ought to feel insulted. Raising taxes in an already overburdened economy can only act as a drag on the economy. And it seems no one wanted to ask the question whether or not government could cut spending in other areas in order to come up with the money to built the mass transit project.

So one of the challenges for policymakers, as they salivate over the increasing tax revenues due to the robust economy, is to exercise restraint in spending those tax dollars. Instead of spending on this or that new program or project, the first step they should take is to right size the tax burden so the economy can continue to thrive. It will also require a keen sense of setting spending priorities and doing some paring back on spending.

Tax reductions can take the form of increasing the standard deduction so those at the bottom end of the income scale can truly be afforded tax relief. At the same time, if Hawaii is to reverse the brain drain by creating high paying jobs that require highly educated graduates to return home, then the income tax brackets need to be broadened and the threshold where the top tax rate kicks in needs to be pushed farther up. Income tax rates also need to be reduced if Hawaii is to be an attractive place to locate a new business and therefore create more investment in the state’s economy. With other states holding top tax rates to three, four and five percent, Hawaii can hardly compete.

Whether or not it is an area that gets more funding or is subject to the budget axe, policymakers should make sure that Hawaii produces a highly skilled workforce. That means education must become a focal point of reform. We all know that kids today are not the same kids of yesterday. Many of the students we see in the classrooms today grew up with video games or some other technological innovation that makes the textbook pale by comparison.

Would the school system have such a high rate of truancy and absenteeism if “school” was really interesting and the course study was relevant to what kids grapple with each day? If chemistry could be taught in the kitchen as students mix solids with liquids or learn math by doubling a recipe, it would seem that at least the school system is reaching out to students to make the educational experience all that more meaningful to them.

Policymakers and community and business leaders need to strike now to shape the economic future of the state. Let’s not pass up the opportunity to make systemic changes that will insure the economic vitality of our community at a time when we have the resources to make those changes happen.

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