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Stop “Ainokea”

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By Lowell L. Kalapa
(Released on 8/9/09)

How many times have you pulled up behind a car or truck that had on it the word “Ainokea?” The first time you saw it, you probably thought it was some Hawaiian word or a name for some group until you mentally pronounced it and realized it was slang for “I don’t care” and you chuckled.

While it may seem a laughing matter while you are on the road, in reality it appears that there are a lot of segments of society that truly don’t seem to care but for themselves. Let’s start with lawmakers who claim to strive for social justice but manage each year not to reduce the burden of taxes on the poor. Hawaii is recognized as having one of the lowest thresholds for imposing its state income taxes on the poor. It is not that lawmakers don’t decry this taxing of the poor, it is just that lawmakers don’t seem to be able to give up spending that money no matter who has to pay those taxes.

The same goes for the general excise tax. Although businesses decry this tax on gross income, it seems they are just not willing to hold lawmakers accountable for the insidious effect the general excise tax has on doing business in Hawaii. Perhaps it is because businesses can pass the tax onto their customers and recover some of the cost of the tax. Few realize that not only is the general excise tax visibly passed on to customers, but because the tax is imposed on the overhead cost of goods and services consumed by the business in the course of its every day activities, that cost of the tax increases the shelf prices of the goods sold and services provided to the customer. So when the public-employee unions call for a one percent increase in the general excise tax rate, it is not just another penny on every dollar. It is estimated that if another percentage point was added on top of the current state rate of 4%, the added burden on a family of four would increase by $1,100 per year.

Is this the kind of added “sacrifice” that public employee union leaders and lawmakers want to hit families with during this recession? Perhaps it is “Ainokea.”

Then there are the environmentalists who believe that we need to buy our way to energy independence by slapping another dollar on every barrel of petroleum product imported into the state. They chide critics of the dollar increase as being disingenuous about going “green” because opposing the additional tax reflects a lack of commitment to energy independence. They belittle the impact of the tax as merely being a few cents per gallon of gasoline as one editorial writer opined in his weekly column. Obviously, that writer bought into the misleading information put out by the advocates of the tax. He wrote in passionate response to the veto of the tax that it would have added only 25 cents to an airline ticket all the while admitting that the tax would have raised between $30 to $40 million a year.

The editorial writer seems to have never run a business, as he does not realize the impact the increased one dollar per barrel of petroleum would have on the overhead cost of every business in the state. Just ask the proprietor of your favorite restaurant what a spike in electricity and cooking gas rates did to his costs last year. And because the tax is imposed at the very front end of the business chain, the additional cost is buried in the cost of every business in the chain that goes from the dock to you, the consumer, be it the warehouse in which the goods are stored to the wheels that transport the goods from the warehouse to the retail establishment.

Ultimately, those costs will pyramid as each subsequent business in the chain tacks the added cost on to their costs and adds their percentage markup. There is no doubt that the cost to consumers and the economy may be twice or three times the $30 million estimated for the additional dollar up front on the barrel of petroleum product. Just surviving as a family or as a business will cost more, but, “Ainokea.”

Finally, it was ironic that the advocates of the high technology tax credit refused to give up on their efforts to have the Governor veto the measure that would substantially limit the generosity of the tax credits, generosity that was estimated to cost the state nearly $150 million a year. This in the face of cuts to health and human service contracts, reductions in educational spending and impending furloughs or layoffs of public employees. They have continued to deride the Governor for not vetoing the bill even as the shortfall hits the most basic of government services and the most vulnerable families in the community. “Ainokea.”

Lowell L. Kalapa is the president of the Tax Foundation of Hawaii. Mr. Kalapa’s commentary is printed each week in the Maui News, West Hawaii Today, Garden Isle News, and the HawaiiReporter.com.

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