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Quandary On Use Of Surplus Leaves Taxpayers Empty Handed

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By Lowell L. Kalapa

(Released on 05/20/07)

Lawmakers would like you to forget the 2007 session because little, if anything, was done to benefit the taxpayers. Oh, to be sure they will remind you of all the wonderful programs they funded and how they made progress on issues like affordable housing, helping the homeless, insuring Hawaii’s energy independence, and addressing the rising cost of health care.

What lawmakers don’t want you to know is that they basically blew the state surplus and in doing so provided little tax relief across the board. While they will point to the fact that they provided a refund tax credit (as they had to do under the state constitution), that tax relief was aimed primarily at the poor and lower-middle income families.  They also adopted a food/excise tax credit – again primarily aimed at lower-income families.

Aside from that, lawmakers will probably preen their feathers with bloated breasts about saving motorists from having to pay the general excise tax on gasoline as all motor fuels are now blended with alcohol. This is because lawmakers reestablished the exemption for alcohol-blended fuels that had been an incentive for people to utilize this alternate form of motor fuels.

Certainly lawmakers will take credit for adopting an incentive to encourage landowners to sell their fee simple interest in residential condominiums and cooperatives that are currently held as leasehold property. With a total exclusion of the capital gains from the state income tax, advocates believe this will encourage landowners to sell their interest in the underlying property despite the fact that the federal capital gains tax will still take a substantial bite out of those capital gains.

But what lawmakers would prefer not to tell taxpayers is that no tax relief was provided to middle to upper income taxpayers with either an adjustment to income tax rates, an increase in the standard deduction or an increase in the personal exemption. Nor will lawmakers be as forthcoming about the increase in the state fuel tax or the fact that they decided to extend the “temporary” increase in the rental motor vehicle surcharge for another year.

And while not directly apparent to the taxpayer, lawmakers turned down the local airlines in their bid to contain the cost of interisland travel by exempting the consumption of bonded aviation fuel from the state general excise tax, an estimated $4 million in cost to all interisland travelers. So while lawmakers can give away millions of dollars to film makers, high technology companies and venture capitalists, the poor interisland traveler will keep on paying higher airfares or perhaps one or more of the interisland air carriers will have to go out of business.

Ah, but lawmakers want you to know is that they are taking care of your needs by spending every single cent they could get their hands on to provide you with more and more services, never mind that some major health and safety programs still went begging for sufficient funds to keep those services coming. Instead, the gold star that lawmakers want you to give them is that they provided tax relief to the poor and spent your hard earned tax dollars on even more programs and services.

Never mind that families continue to struggle to make ends meet but won’t qualify for the tax “breaks” for the poor because they are working two or three jobs just to put food on the table and a roof over their heads. Never mind that Hawaii continues to rank in the top ten percent when it comes to per capita tax burden of combined state and local taxes.

So the next time the economy nose dives and unemployment soars, let’s hope that lawmakers will remember that they missed a golden opportunity to set the state’s economy on a firm foundation. Or will they look back and lament that they “shoulda” and “coulda” done something to make Hawaii a more inviting place to do business, a place to grow more jobs, a place that would not be so costly that it drives businesses and families away.

Yes, as one former legislator opined earlier this year, where is the product of this legislature? What has the legislature done to make things better in Hawaii – for everyone and not for a select few? Lawmakers had a golden opportunity to put that surplus to use to better the lives of all Hawaii’s people. Unfortunately, they dropped the ball and hope that no one will notice.

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