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Putting Taxes And Spending Into Perspective

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By Lowell L. Kalapa

(Released on 04/22/07)

As the legislature races toward adjournment this week, all eyes will be focused on the state budget, the state’s spending plan for the next two fiscal years. Those most interested will be those who will benefit from the state’s largesse in the general fund which is the beneficiary of your taxes.

But taxpayers won’t be paying as much attention as most are too busy working to the pay the taxes that lawmakers like to spend. Those who benefit from the spending will be jockeying to get their hands on as many of those dollars as the competition for the state’s large surplus pits one program or service against another. And the competition for those dollars is fierce as evidenced by the requests for grants-in-aid which totaled more than $330 million this year. While it is doubtful that all of those requests will be funded, it is an indication of how many want to feed at the public trough.

Unfortunately, there are some beneficiaries who have already gotten their share of the pie and they are certainly not willing to give it up even though no one knows how that money was spent. These are public funds, taxpayer dollars that are spent out the back door with little or no oversight by elected officials and are called tax credits. In fact, both administration officials, as well as lawmakers, don’t know how much has been spent on these tax credits because that information is “confidential” information contained on tax returns.

This is what disturbed the latest Tax Review Commission, that there was no way to determine how much in high technology tax credits had been claimed by investors or for that matter what kind of employment had been created or the types of jobs. Estimates of how much the ten-year program would cost taxpayers ranged from $600 million to $1 billion. With that kind of money, taxpayers should be concerned!

Why? Because every dollar of tax credit claimed means that those taxpayers not so favored have to shell out one more dollar to offset the loss of that dollar of tax credit. In other words, lawmakers are not giving up spending and need as many tax dollars to keep government running as well as to be able to hand out those grants-in-aid dollars, so they keep on asking us, as taxpayers, to continue paying as much, if not more, tax dollars than we did last year.

This is why Hawaii taxpayers have not seen their tax bills go down. Yet elected officials at all levels of government wring their hands and decry the high cost living in Hawaii citing the fact that many families have to work two or three jobs to make ends meet. At the same time they point to the many pressing social problems plaguing our community to justify spending your tax dollars on those programs.

And certainly that is one reason why government was created, to address problems that cannot be solved by individuals but must be addressed by the community as a whole. Government is the ultimate evolution that began with clans and tribes from prehistoric days. The problem is that government today tries to be everything to everyone including putting its nose in the natural order of the marketplace.

In the case of state government, elected officials figure they know what is best for Hawaii’s economy by adopting tax incentives to encourage or subsidize certain industries, from high technology to ethanol to agriculture and digital media productions, elected officials believe that they can shape the future of the economy. And perhaps they can, but it comes at a very dear price to the current economy and with even more dire consequences for taxpayers today. While the beneficiaries of those tax credits and other incentives revel in the fact that they are getting ahead because of all the investments in their industries, they give little thought to the fact that the rest of the taxpaying public is laboring under a heavy burden of taxes so that they can reap huge profits and get all of their investment back regardless of the success or failure of the business.

Now that the Tax Review Commission has raised the question about the efficacy of these tax incentives, let alone knowing how much they are costing the state, those so favored are beginning to push back trying to justify the existence of those tax credits. What they fail to admit is that the bottom line is that these tax incentives are nothing more than the expenditure of public tax dollars for which there are questionable, if not unknown, benefits for all other taxpayers.

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