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Again, Let’s Repeat It, There Is No Money

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By Lowell L. Kalapa
(Released on 3/7/10)

It is truly amazing that despite months and months of arguing between all parties it seems few, if any, really comprehend the financial situation facing both the state and counties.

The public employee unions demand that their members either get paid or they won’t work, resulting in “furlough Fridays” while health and human service providers berate lawmakers to raise taxes so services won’t be cut to the neediest in the community. Then there are those taxpayers who enjoy generous tax breaks, such as the high technology income tax credit, who scream at the very thought that lawmakers might take back those tax breaks or tax credits.

Meanwhile taxpayers, be they in the role of employees, families, or business owners, shudder with the thought that taxes will go up especially as they watch their paychecks shrink because someone in the household or at the place of business lost their job or had their hours cut. While there was some sigh of relief recently as lawmakers approved a scaled-down version of a looming hike in the unemployment insurance tax, many realize that relief will be temporary as the reduction in the tax rates is good only for the next two years. Lawmakers are hoping that the economy will get better by that time so the big bite that is scheduled won’t be as difficult to swallow, but a big bite it will be.

What is keeping lawmakers from going for the easy fix of merely raising taxes is the reality that Hawaii’s businesses are far from healthy as a result of the weak global and national economy. Thus, any further “injury” to Hawaii’s businesses will certainly have a negative impact on the state’s recovery from this economic downturn. Should lawmakers hike taxes on businesses and families, those that are right on the edge will surely fail. Businesses will lay off workers because of the higher costs, families will find that their paycheck doesn’t stretch quite as far and perhaps may even have to resort to food stamps to put food on the table.

Thus, a hike in the cost of living and doing business in Hawaii will, in fact, make things worse for Hawaii’s businesses and their employees as well as the families of those employees. So instead of addressing the needs of the poor, a tax hike will merely exacerbate the problem by putting more people on the welfare rolls. Rather than just trying to fill the budget gap by raising more revenues, lawmakers need to pay more attention to actions that will help heal the economy, create the jobs that families sorely need to put food on the table, and put Hawaii back to work. A hike in taxes will not accomplish any of those goals.

Unfortunately, those families and businesses are too busy trying to keep their doors open or hold down two or three jobs to make ends meet so their voices are not the ones lawmakers are hearing at the state capitol. No, it is those who benefited from government’s spending that are down there demanding that spending not be cut, that lawmakers find a way to make programs and public employees whole.

What is ironic is that many of the supporters of the nonprofit health and human service agencies are those who would target a tax increase say on higher income earners under the income tax or the businesses who give generously to many of their causes in the community, but would then be under the gun with an increase in the general excise tax. In the case of the teachers, many of the schools benefitted from individuals who gave generously of their time, talent and money to support school programs as evidenced in the highly successful drive to save the public high school athletic programs last fall.

As noted many times before, so often we get embroiled in our own narrow interest or area of concern that we fail to see the bigger picture. In this case the bigger picture is that there is no money to be had because the economy is in the dumps and no amount of rustling the tax bushes is going to cure what ails our community. Instead, the community needs to come together and, yes, bite the bullet and share in the brunt of these economic hard times, but at the same time it is imperative that the community work together to find solutions through collaborative efforts to fill in the holes and gaps created by the downturn in the economy.

The overarching goal should be to restore the health of our community and the state’s economy so all can prosper and have hope for the future. Expecting someone else to take the hit so we can be spared and be kept whole does not raise all ships.

Unfortunately, that latter philosophy can spell nothing but disaster for the state’s future.

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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