Taxpayers should know that it is not only the Tax Review Commission eyeing ways to raise additional revenue, but also various special interest groups that have been frustrated by cuts to programs over the past few years as the economic recession took its toll on state tax revenues.
While lawmakers like to blame the poor economy for all the cuts they had to make to the state operating budget, they are by no means without blame for the decline of tax revenues. Perhaps believing the euphoric high brought on by the rapid recovery after Sept. 11, 2001, gave them license to go where no man had dared to go in the past, lawmakers thought they could determine the state’s economic destiny by providing incentives to grow jobs and the economy. While advocates of tax incentives argued they would diversify the economic base and create jobs in the future, the underlying reason for such support boiled down to nothing more than self-interest.
Instead of unifying the community on a common goal, those tax incentives segmented the community into silos of special interests where businesses and industries sought to preserve and protect those special goodies at the expense of other taxpayers. At the height of the high-technology tax credit bonanza, it was pure heresy if one should criticize it. Even now, no one dare question tax credits for filmmakers in the wake of productions like “The Descendants,” which drew a wave of enthusiasm from across the globe, not so much for the plot or the story told but for the display of paradise and the natural beauty that is Hawaii’s alone.
The problem is most observers, lawmakers included, don’t seem to make the connection that tax incentives handed out for high technology, film production or biofuel development come at an expense to the state treasury and taxpayers not so favored. The result is a shortfall in resources needed to keep vital state services and programs funded. And, of course, when lawmakers can’t find enough spending cuts, they have turned to raising taxes.
That’s what is wrong with the approach the current Tax Review Commission has taken by asking their consultants to project what it will cost to fund the current level of services some 10 or 20 years into the future. That directive assumes programs and services currently provided cannot be reduced or be provided in a more efficient manner. The commission seems to have overlooked the fact it is not its kuleana to decide what services and programs are to be provided. That decision is solely the responsibility of policymakers or legislators.
Instead of examining whether some of lawmakers’ recent efforts to raise additional revenues were fair and equitable, or for that matter evaluating whether many tax credits and other incentives over the past decade were effective in accomplishing their much touted goals, the commission seems to have decided if there’s not enough revenue in the forecast, try increasing taxes to fill that shortfall.
That perspective ignores the possibility the people want or need all of those programs and services currently being provided. It also ignores whether or not the burden of taxes and fees being borne by taxpayers is appropriate. Even the consultants have admitted in their midterm report that Hawaii, unlike many other states, is not constrained by initiatives such as California’s Proposition 13.
However, it is obvious the study has serious credibility problems, especially when the consultants do not seem to be familiar with nor seem to have done their homework in learning about Hawaii’s tax system. When one consultant declared Hawaii has one of the lowest fuel tax rates in the nation while every other survey ranks Hawaii’s fuel tax rates to be the fourth-highest in the nation, one has to question the credibility of his review.
Taxpayers should be concerned about the direction the commission has taken since a review of the cost drivers of state spending is not a review of tax policy nor is it an evaluation of the state tax system. As noted earlier, the direction the commission is taking is nothing more than a set-up of taxpayers for continuing tax increases down the road. Further increases in the burden could have dire consequences.
Lowell L. Kalapa is president of the Tax Foundation of Hawaii.
