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Green Can Have Dear Economic Price

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By Lowell L. Kalapa
(Released on 9/5/10)

Today it is politically correct to be “green.” After all, how can any elected official oppose the preservation of the “aina” and still be elected to office?

So a politician would be deemed crazy if he or she ever opposed a measure that is touted to be “green” or environmentally friendly. As a result, over the years lawmakers have approved increasing taxes or adding on new fees whenever the purpose of the program to be funded with these new fees or increased taxes was to protect the environment. These range from preserving legacy lands to moving off dependence of fossil fuels.

Because many of these programs probably could not have competed with programs and services that government has traditionally been charged with providing like education and health and safety, advocates of these “green” initiatives resorted to utilizing existing taxes that basically fly below the radar in that they are rarely paid by the general population or are paid by businesses who must then pass the cost on in the price of their products or services. As a result, the cost of those taxes and the funding of those programs is not transparent.

For example, the tax on the conveyance of real property is probably paid by an individual or family perhaps only once or twice in the taxpayer’s lifetime or not at all if the taxpayer is a renter of his or her shelter. The conveyance tax began merely as a means of recording the value of a sale of real property so that the real property tax assessor had an indication of the value of the properties in a certain area or neighborhood. It had been set at a nominal nickel per hundred dollars of value. The proceeds went into the state’s general fund.

However, as state finances became strained in the early 1990’s and programs were put on the chopping block, advocates of the state’s natural area reserve program pushed to double the tax rate and take the proceeds of the increased rate for not only the natural area reserve program but also for another motherhood issue, affordable housing. With a double whammy, how could any elected official vote against such a proposal? Besides, the increase was only a nickel per hundred dollars of value. With the waning of the real estate market, the beneficiaries realized how volatile this particular tax is, reacting to the ups and downs of not only volume of sales but the dollar value of those sales. So back they came asking that lawmakers consider a hike in the rate. This time they armed themselves with two bits of questionable logic. First, so many filthy rich nonresidents were buying or building second homes in Hawaii why not hit up multimillion dollar transactions and get money from those nonresidents by imposing the highest rate on transactions over a million dollars and even higher rates on residential property purchased by those who will not be owner occupants of that residential property.

Advocates also argued that by comparison to Vermont, Hawaii’s conveyance tax rate was amongst the lowest in the nation so they proposed to adopt Vermont’s conveyance tax rate as the highest rate to be imposed on Hawaii sales. Forget the fact that one can probably buy a single family home on a half acre of land in Vermont for $100,000, while the median price of a single family home on Oahu, where the majority of the state’s population resides, is well over $600,000.

This epitome of legislative intelligence also ignored the fact that most nonresidential properties are probably well over a million dollars and therefore the business purchasing that real property will pay the highest conveyance tax rate that the business will eventually have to recoup in the cost of the goods or services sold. It also ignores the fact that most non-owner occupied residential property is eventually occupied by renters, so it is the poor taxpayer who cannot afford to purchase his or her own shelter who will be saddled with this additional cost.

And, of course, this year advocates of moving away from a dependence on fossil fuels pushed to hike the barrel tax which was originally established to set up an emergency fund to pay for oil spills off Hawaii’s shores. The additional dollar per barrel is supposed to pay for Hawaii’s going “green” by funding alternate energy projects. The added tax rate is projected to raise millions of dollars each year.

While being environmentally friendly may be politically correct, note well that lawmakers did not redeploy existing financial resources to fund these initiatives. They resorted to imposing new taxes and fees, further draining money out of the economy and out of taxpayers’ pocketbooks. If going green is so politically correct, then it should be a priority to be funded out of existing taxes not new or higher tax rates.

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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