The problem with that hypothesis is that while the visitor pays the tax as it is 鈥減assed on鈥� by the hotel or accommodation, it is the economy, as a whole, that winds up bearing the burden of the tax.

The same can be said of the counties as they levy a much higher real property tax rate on hotel and resort properties than on other commercial or business properties let alone residential properties and homeowners.

This is nowhere more evident than in the latest report of general fund tax collections produced by the department of taxation. Every month the department issues a 鈥淧reliminary Comparative Statement of State General Fund Tax Revenues鈥� which provides tallies of the major tax resources of the general fund. Of course, this report includes the largest source of tax revenues, the general excise tax, and the net individual and corporate income taxes, as well as the collections for the accommodations tax, known as the TAT.

The report for November pegs growth in TAT revenues at a positive 9 percent while the collections of the general excise tax are down by 3.4 percent compared to last year. Although some of this decline may be attributable to the way the combined collections of the general excise tax and the county surcharge for the Honolulu rail project are allocated this year, even when the combined collections are measured against last year, the amount of general excise taxes collected through November is down by 0.2 percent.

Some observers believe that this may be due to the fact that the suspension of several business exemptions expired with the beginning of the current fiscal year. However, most agree that the suspension of the two-dozen exemptions did not have a significant revenue impact as the legislation providing for the suspension also provided grandfathered status to many of those who had long enjoyed the exemption.

State economists, on the other hand, believe that the sharp increase in hotel room rates this past year cut into the discretionary spending of visitors. The combination of the higher rooms rates and the hike in the TAT rate to 9 percent appear to have eaten into visitors’ budgets. As a result, less was spent on everything from tours to canoe rides to souvenirs.

On the other hand, one would think that the higher room rates would also have resulted in increased general excise taxes collected on those room rentals. Apparently those higher room rates and, therefore, higher general excise tax collections on the room rentals, were not enough to offset the pull back on visitors鈥� discretionary expenditures.

If, in fact, this is what happened, it underscores the hypothesis that increasing the TAT rate on room rentals merely steals dollars that would otherwise be spent by visitors on other goods and activities. Thus, in the end, the people who suffered were all of those businesses who would otherwise have benefited from visitor spending.

What observers have long opined is that leisure visitors come to Hawaii on a budget. A specific amount has been planned for the 鈥渧acation of a lifetime鈥� and when major non-discretionary expenses, called shelter or the hotel room, eats up more of that budget, what is left to spend decreases. There is less dining out or less fine dining, more stops at the fast food counters or in the mini markets. There is less on-premise consumption of alcoholic beverages. This, in turn, affects those who work in the bars and restaurants that depend on the visitor traffic. Hours may be reduced or positions eliminated because there isn鈥檛 enough business to justify a fully-staffed shop.

So while state and county officials may rub their hands with glee at the thought of making the visitor pay more for that hotel room by jacking up the TAT rate or levying higher real property tax rates on hotel/resort properties or time shares, in the end those higher tax collections come at a cost for all those other businesses and employees who depend on that visitor dollar.

Elected officials must realize that, unlike the business traveler who may be traveling on a corporate expense account, the leisure traveler – who makes up the bulk of Hawaii鈥檚 visitors – has a bottom to his or her travel barrel.

In this case, officials have to realize that raising taxes on the visitor is beginning to have a negative effect on the state鈥檚 economy. In this case, it is much like that old movie title, 鈥淪omething鈥檚 Gotta Give.鈥�

About the Author: Lowell Kalapa is the President of the Tax Foundation of Hawaii.

Community Voices aims to encourage broad discussion on many topics of community interest. It’s kind of a cross between Letters to the Editor and op-eds. This is your space to talk about important issues or interesting people who are making a difference in our world. Columns generally run about 800 words (yes, they can be shorter or longer) and we need a photo of the author and a bio. We welcome video commentary and other multimedia formats. Send to news@civilbeat.com.

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Although Hawaii has had a good year for its main economic engine, tourism, even as we speak there are indicators that it will be difficult to sustain the kind of growth witnessed over the past year.

Sensitivity to rising room rates and international competition for that visitor dollar reinforces the caution embraced by many industry leaders. Given that there are so many factors that could determine how well the visitor industry does in the coming years, like airline seat capacity, exchange rates, and the health of the global economy, nothing is certain in the fortuneteller鈥檚 cards.

To say the least, Hawaii has a less than stellar reputation as a place to do business as evidenced by a number of recent rankings. In fact, Hawaii, more often than not, tends to end up at the bottom of the pile in terms of business climate.

Yet by all measures and standards, Hawaii continues to be a capital-short state. And for those policymakers who don鈥檛 understand what it means to be a capital-short state, it means that Hawaii needs constant infusions of capital 鈥� read money here 鈥� in order to create jobs and financial prosperity to keep the economic engine humming.

While some lawmakers will look for a 鈥渜uick fix鈥� like a tax credit or a tax exemption for a favored activity 鈥� be it high technology, bio-fuel production, electric cars, or solar heating devices 鈥� taxpayers have come to learn that those gimmicks produce little in return for their high cost.

And high cost means that all other taxpayers must pick up the tab not only for the cost of the gimmick, but also for the cost of keeping government running. As a result, the tax burden remains high, which is a major deterrent to attracting capital and businesses to Hawaii.

Then, there is the 鈥渉idden鈥� cost of doing business in Hawaii 鈥� regulations, which includes everything from building permits to licensing and compliance with the various rules that govern doing business in Hawaii.

鈥淥pening up shop鈥� in Hawaii means more than unlocking the front door and turning on the lights. It means filling out a plethora of paperwork to pay your taxes and reporting the employment of workers.

It means securing mandatory prepaid health care insurance and dealing with workers鈥� compensation insurance and claims that may be filed. While many of these requirements were adopted in the interest of health and safety in the workplace and job security for workers, they now form a maze with bumps in the road that are designed to trip up the employer at every turn.

If lawmakers truly want to do something to stimulate economic activity and attract investors to set up business in Hawaii, then they need to do everything they can to streamline the whole process of setting up a business and complying with the myriad of laws and regulations with which businesses must contend. Perhaps lawmakers might even consider getting rid of a few of those regulations or consolidating some of the information that is collected from employers each month.

At the county level, streamlining the permitting process and working cooperatively with businesses attempting to set up shop instead of acting like a regulator might in fact induce more businesses to expand and improve their workplaces.

Too often businesses shy away from renovations or improvements knowing all too well that they will have to deal with the costly and time- consuming process of securing the necessary permits. Some of the delays are also often due to delayed inspections to secure the final approval for occupancy because one type of inspection cannot be done until another is done, thus delaying the opening of a business.

Those frustrating delays cost businesses money, a cost that must be recovered in the shelf price of the goods or services provided by that business. Thus, we, as consumers, end up paying for the inefficiencies of government regulation. Thus, all taxpayers have an interest in reducing the costs imposed by government as those costs contribute to the high cost of living and doing business in Hawaii.

Thus, as lawmakers prepare for the 60-day marathon legislative session, they should focus on ways to reduce the costs imposed on businesses and all taxpayers. Improving the business climate will be key to whether or not there will be a vibrant economic future for Hawaii.

About the Author: Lowell Kalapa is the President of the Tax Foundation of Hawaii.

Community Voices aims to encourage broad discussion on many topics of community interest. It’s kind of a cross between Letters to the Editor and op-eds. This is your space to talk about important issues or interesting people who are making a difference in our world. Columns generally run about 800 words (yes, they can be shorter or longer) and we need a photo of the author and a bio. We welcome video commentary and other multimedia formats. Send to news@civilbeat.com.

The post Hawaii Tax Policy Should Be Equitable and Not Hinder Economic Growth appeared first on 天美视频.

There is no doubt that some legislative leaders have come to realize that government has grown far beyond the ability of the state鈥檚 economy to support that government.

While lawmakers and administrators may have been able to make a case for higher taxes over the past few years because of the downturn in the economy, both nationally and locally, with the revelation that state government is now wallowing in substantial surpluses, there is absolutely no reason for maintaining the tax increases enacted as temporary measures to close the budget gap.

Many of those tax increases were aimed at specific target groups who either could not vote – as is the case of visitors with a hike in the TAT or hotel room tax – or those with higher incomes.

In the latter case, there were increases in net income tax rates that put Hawaii on par with residents of California who have to deal with the highest income tax rates in the nation, along with the loss of itemized deductions and the loss of the deduction for state income taxes paid.

While the latter net income tax provisions don鈥檛 affect the majority of island residents, it is noted by observers across the nation, if not around the world, as a measure of how Hawaii treats its taxpayers, creating a negative perception of Hawaii.

While local lawmakers may shrug their shoulders and say 鈥渢oo bad鈥� for those rich people, these statistics have an impact on how Hawaii is perceived as place to live, work, play, and more importantly, as a place to do business or invest.

Without the investment of foreign-sourced capital, Hawaii鈥檚 economy can not be sustained as it has long been acknowledged as a capital short state. Put more succinctly, if I give you a dollar today for your product and you give me the same dollar tomorrow for my product, neither of us is better off than we were two days ago.

Only when someone brings a dollar from outside the state do both of us do better as it is a dollar more than either of us had two days ago.

When juxtaposed against the mantra chanted a few years ago by advocates of the high technology investment tax and research credits that promised high paying six-figure jobs – if those high technology jobs were spurred on by the tax credit, it certainly seems hypocritical that the highest income tax rates are being imposed on those six-figure salaries.

Why would anyone making a six-figure salary in the high technology area want to come to Hawaii to work and pay those high tax rates on his or her salary?

Although the higher net income tax rates and the limitation on itemized deductions will be repealed after 2015, the loss of the deduction of state income and sales taxes is permanent. Although the state has a surplus of more than three-quarters of a billion dollars, those higher tax rates and the limitation of itemized deductions will continue for two more years.

Although lawmakers continually point to the growing unfunded liabilities of the state鈥檚 health care costs for retirees and its pension obligations, it would appear unnecessary to continue imposing the higher rates and the suspension of the deduction for state taxes and the limitation on itemized deductions for higher income individuals.

Lawmakers have already reversed themselves on the limitation on itemized deductions when many charitable organizations pointed out how that limitation prevented many higher income individuals from making substantial charitable gifts. While such increases may have been justifiable as an interim means of shoring up the state general fund, they no longer can be justified given the swelling state coffers.

There is no doubt that those who like to spend those surplus dollars on new programs and services will come up with new programs and projects in order to sate their constituents. There will be cries to restore this or that program or service that was cut during the economic and fiscal downturn.

But lawmakers need to stop and ask whether or not those requests are truly critical to the health and safety of the community and whether or not those programs or services could be better delivered through the private sector. This is truly an opportunity to right-size government and to put aside funds for a rainy day which is sure to come. Lawmakers must resist the temptation to spend and think about giving back to grow the economy.

About the author: Lowell Kalapa is the President of the Tax Foundation of Hawaii.

Community Voices aims to encourage broad discussion on many topics of community interest. It’s kind of a cross between Letters to the Editor and op-eds. This is your space to talk about important issues or interesting people who are making a difference in our world. Columns generally run about 800 words (yes, they can be shorter or longer) and we need a photo of the author and a bio. We welcome video commentary and other multimedia formats. Send to news@civilbeat.com.

The post Time to Ease the Tax Burden to Allow the Economy to Prosper appeared first on 天美视频.

Anytime Hawaii hit a bump in the economic road, local leaders got on the phone to Washington, D.C., and asked for a federal bail out. Who needed to worry about the local business climate when they could run to the federal government for another splurge of federal dollars for the state, whether defense spending or native Hawaiian programs.

Ah, but with the change in dynamics and the loss of seniority on the 鈥淗ill,鈥� local leaders, both within government and in the private sector, will have to deal with the apathy of the last 50 years when almost nothing was done to make Hawaii an attractive place to do business.

Oh, that is not to say that Hawaii is not an attraction to global investors like the Japanese of the early 1990s, but to those investors the obvious attraction was that Hawaii is a great place to make a quick buck because of the public policies such as the law of supply and demand.

This is true of real estate which is available for development. In an environment where less than 5 percent of the total land mass is zoned urban, the value of what is zoned urban can only go up. This is why during the last recession when the housing market in the rest of the country took a nose dive, real estate values in Hawaii hardly declined at all. Certainly there was less activity, but overall the value of real estate in Hawaii did not falter.

But what state and local officials need to recognize is that if Hawaii is to prosper, attitudes and laws governing Hawaii鈥檚 business climate must change. When Hawaii continuously ranks at the bottom or near the bottom as a place to do business, one would think that community leaders would do something about changing that perception. For those businesses which are long established in Hawaii, they probably prefer the status quo. After all, they got their sweet spots and don鈥檛 want their apple carts upset. What they don鈥檛 realize is that unless there is a strong and vibrant community, Hawaii will eventually end up in an economic abyss.

Although political leaders will point to their economic achievements over the last decades, those efforts were nothing but short-term fixes about which they could write glowing press releases. These efforts took the form of tax incentives, like tax credits for high technology, that lawmakers promised would attract high paying jobs – high paying jobs that lawmakers turned around and taxed at the highest rates in the nation.

Then there are tax credits for film productions that are nothing more than a flash in the pan, here today and gone tomorrow. Sure those film productions send residents all a 鈥渢witter鈥� as we swoon over the latest super star in this episode or that, but one has to ask if those productions are creating permanent jobs, and if they are, does it mean that the taxpayers of Hawaii will have to continue shelling out hard-earned tax dollars to subsidize those Hollywood productions?

Then there is the tax incentive for the development of alternative fuels which initially focused on ethanol as a means of supporting the sugar industry – after years of beating up on the sugar industry. And when that didn鈥檛 work out, switching the tax credit to the more generic 鈥渂iofuels.鈥� Of course, all of these efforts came at a cost to current and future taxpayers as someone had to pay for the cost of keeping government running.

Instead of resorting to gimmicks, policymakers at all levels need to examine how government has impeded the nurturing of the business climate in Hawaii. While some elected officials would like to deny that they have created the road blocks that each business encounters in their attempt to succeed, the evidence is there, from labor laws, to permitting requirements, to the delays to just make decisions because employees don鈥檛 want to take the responsibility for possibly making the wrong decision. In fact, this latter trait is consistently emblematic of those in public sector where no one seems to realize that not making a decision is indeed a decision to do nothing.

So leaders in both the public and the private sector need to realize that the days of depending on a constant flow of federal dollars to bail out the state鈥檚 economy are over. It is now time for policymakers to get down to work and begin to address the hurdles that prevent businesses from succeeding and creating jobs that workers need now and into the future.

About the author: Lowell Kalapa is the President of the Tax Foundation of Hawaii.

Community Voices aims to encourage broad discussion on many topics of community interest. It’s kind of a cross between Letters to the Editor and op-eds. This is your space to talk about important issues or interesting people who are making a difference in our world. Columns generally run about 800 words (yes, they can be shorter or longer) and we need a photo of the author and a bio. We welcome video commentary and other multimedia formats. Send to news@civilbeat.com.

The post It’s Long Past Time to Make Hawaii an Attractive Place to do Business appeared first on 天美视频.

Proponents of increasing the minimum wage decry the fact that the minimum wage is insufficient to make ends meet for a single mom who has to work to support her children. What those proponents seem to forget is that the minimum wage was adopted as the lowest possible wage that could be paid to a worker and is usually extended to those who join the workforce with no job skills at all. We are talking about, for example, a high school student searching for a summer job who has no work skills, be it understanding that they need to be at their place of employment before the shift begins or that dressing appropriately is a requirement to hold that job, be it wearing shoes instead of slippers or with hair well groomed if the job requires serving a customer in a restaurant or in a retail store.

The minimum wage was never meant to be this 鈥渓iving wage鈥� that everyone from the President on down to local legislative leaders would like people to believe.

While a modest increase in the minimum wage would recognize that costs have been exacerbated by the effects of inflation, the call for an increase in the minimum wage by nearly $2 an hour will have far reaching effects that will be self-defeating in the drive to provide enough income to 鈥渕ake ends meet.鈥�

First of all, one of the simplest questions is 鈥渨here will the money come from鈥� to pay the higher minimum wage? The most obvious answer is that employers will have to raise the costs of the goods and services they make and sell. That means the cost of the higher minimum wage will have to be recovered in a can of corn or in that loaf of bread. With a substantial hike in the minimum wage, employers will probably not only have to increase the price of the goods and services they sell, they may also have to reduce the number of people who are paid that minimum wage.

So the economic impact resulting from a big jump in the minimum wage is that the cost of living will rise at one end and at the other end, workers will either lose their jobs or they will see their hours shortened. Thus, such a hike is self-defeating as the higher minimum wage worker will probably see a commensurate rise in the cost of everything from groceries to shoes and/or they may actually find themselves out of work or working less hours.

Both not a good thing from an economic point of view as the higher wages and, therefore, higher prices will accelerate the inflation rate while reducing the number of employment opportunities. So much for prosperity for the nation鈥檚 workforce – be it the consumer or the worker.

Given the fact that the nation鈥檚 economy is no longer insular but must compete on the world marketplace, rapidly increasing wages will, no doubt, make goods and services sold to our trading partners that much less price competitive.
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While political leaders decry the loss of jobs to overseas markets, do they realize a substantial increase in the nation鈥檚 minimum wage will insure that those jobs that were outsourced overseas will probably stay there?

What political leaders need to realize is that the minimum wage was meant to be a wage that employers are required to pay an employee even if that employee has no skills. Most employers realize that once trained, that skilled employee is a valuable asset who can be retained as long as those skills are rewarded with increased compensation and benefits.

Politicians who cite employees who are earning the minimum wage in a job that the employee has held for several years seem to overlook the obvious question. That is, if that employee is still earning the minimum wage after holding the same job for a number of years, has the employee made no effort to improve or acquire better job skills?

A higher pay rate is the incentive for an employee to improve productivity with better job skills. On the other side, for the unskilled, first-time job applicant, those potential job opportunities will shrink as employers become more discerning about who they hire, taking less risk on hiring unskilled workers, weighing the additional cost of the higher minimum wage against the cost of training that unskilled worker.

About the author: Lowell Kalapa is the President of the Tax Foundation of Hawaii.

Community Voices aims to encourage broad discussion on many topics of community interest. It’s kind of a cross between Letters to the Editor and op-eds. This is your space to talk about important issues or interesting people who are making a difference in our world. Columns generally run about 800 words (yes, they can be shorter or longer) and we need a photo of the author and a bio. We welcome video commentary and other multimedia formats. Send to news@civilbeat.com.

The post Lowell Kalapa: Debate over ‘Minimum Wage’ Shows Ignorance appeared first on 天美视频.

Therefore, it should come as no surprise that proposals to increase Social Security benefits, address the sustainability of the program and shift the burden of taxation to others are popular with elected officials.

Unfortunately, those well-intended initiatives run counter to efforts to encourage prudence in the current and future generation of workers. They perpetuate the myth that Social Security will be able to provide a comfortable retirement income when that time comes.

Indeed, the challenge that many current retirees face today was predicated on the false belief that Social Security benefits would provide an adequate income in retirement despite the numerous warnings and red flags raised by financial observers that constantly proclaimed that those benefits were only meant to supplement whatever workers could put aside for their retirement years.

Even congressional lawmakers long ago recognized the need to encourage workers to save for their retirement when tax deferred saving plans were established under the federal Internal Revenue Code. Savings plans like 401(k)s, 403(b)s, SEPs, and 457(b)s, which allow workers to save pre-tax dollars for their retirement nest egg, were adopted over the years with the realization that workers needed an added incentive to put money away for their retirement years.

Although officials, as well as financial advisers, continue to underscore the point that Social Security benefits are a supplement to the retirement savings of workers, workers seem to ignore the advice and put off saving for retirement until the later years of their career.

For 鈥淏aby Boomers鈥� who are now entering retirement, the cold hard reality is finally hitting them squarely between the eyes. This is probably the first generation of retirees, especially in the private sector, who will have no defined benefit pension plan. That is a pension plan for which employers put away funds for the benefit of their employees. Instead, many of those workers who will be joining the ranks of retirees were given the option of participating in tax sheltered or tax deferred savings plans like the 401(k)s and 403(b)s.

However, it seems many of these workers looked at Social Security benefits as their 鈥渞etirement plan鈥� thinking that those benefits would be sufficient for their retirement. As many who have retired have learned, Social Security benefits are not enough to live on especially here in Hawaii where the cost of living is so high.

So now elected officials, wanting to pander to the senior voters, proposed that the amount of benefits be sweetened by as much as $65 a month and that the cost of living adjustments be more generous to take into account the 鈥渢rue costs to seniors.鈥�

And to pay for this enhancement of benefits, they propose removing the cap on salaries which are currently capped at $113,700. After all, elected officials argue, those workers earning more than that cap are sheltered from 鈥減aying into Social Security as the majority of hardworking Americans do.鈥�

But as those familiar with Social Security benefits know, the amount of the benefits received in retirement is based on earnings over a 35-year period. So will those same elected officials support a calculation of benefits for those who continue to pay the Social Security tax based on the total earnings on which they will be required to pay the tax?

If taxpayers believe that the Social Security system is already headed for a financial cliff, wait until they understand how the benefits payable on an unlimited wage base will sap the system. Thus, if elected officials believe they can address the solvency of the Social Security system and provide a more generous benefit to current retirees by shifting the burden of financing to high-income earners, it is truly a reflection of the ignorance of those elected officials.

Not only would such an ill-conceived proposal ruin the system, but it also runs counter to all the efforts being made to encourage the American workforce to set aside their own personal savings for retirement. Such a proposal would create false hopes for millions of future retirees and shift the burden for financing the system forward.

About the author: Lowell Kalapa is the president of the Tax Foundation of Hawaii.

Community Voices aims to encourage broad discussion on many topics of community interest. It’s kind of a cross between Letters to the Editor and op-eds. This is your space to talk about important issues or interesting people who are making a difference in our world. Columns generally run about 800 words (yes, they can be shorter or longer) and we need a photo of the author and a bio. We welcome video commentary and other multimedia formats. Send to news@civilbeat.com.

The post Quick Fix for Social Security Could Create False Hopes appeared first on 天美视频.

As expected, Hawaii came in almost dead last as one of the lowest combined state and local sales tax rates, outdone only by Alaska which posted a 1.69 percent rate compared to Hawaii鈥檚 4.35 percent rate.

Unfortunately, another think-tank organization called the National Center for Policy Analysis (NCPA) picked up the more sensational parts of the report listing the states with the highest combined sales tax rates and the states with the lowest combined sales tax rates. Of course, Hawaii stood out like a sore thumb as being in the bottom five with a 鈥渓ow鈥� combined rate.

Although the NCPA news release did note that some states relied on other taxes and, therefore, may not have as a high a rate as those states that depend heavily on the sales tax as a major source of revenue, it failed to note that the other factor in determining the burden of the sales tax – or in the case of Hawaii, the general excise tax – is the base against which the rate is applied.

Had the NCPA newsletter been more careful, it would have quoted Scott Drenkard of the Tax Foundation who wrote:

This report ranks states and cities based on tax rates and does not account for differences in tax bases (e.g., the structure of sales taxes, defining what is taxable and non-taxable). States can vary greatly in this regard. For instance, most states exempt groceries from the sales tax, others tax groceries at a limited rate, and still others tax groceries at the same rate as all other products. Some states exempt clothing or tax it a reduced rate.

The taxation of services and business-to-business transactions also vary widely by state. Experts generally agree that Hawaii has the broadest sales tax in the United States, taxing many products multiple times and, by one estimate, ultimately taxing 99.21 percent of the state鈥檚 personal income. The base is far wider than the national median, where the sales tax base applies to 34.46 percent of personal income.

In other words, unlike other states that have a retail sales tax structure, Hawaii鈥檚 general excise tax focuses on the gross income received by a business located in the state. That means any and all of the gross income received by a business licensed to do business in Hawaii is subject to the state鈥檚 general excise tax. This means that sales of both goods and services are subject to the state鈥檚 4 percent general excise tax. In addition, when goods and services are not sold for final

consumption but are being purchased for resale to the customer of the purchasing business, the general excise tax is charged, albeit at the lesser 0.5 percent rate.

Where Scott Drenkard failed to close the loop is that Hawaii鈥檚 general excise tax is applied to services which in today鈥檚 modern economy account for a much larger share of the tax base than the sale of goods. In fact, in Hawaii it is estimated that only 40 percent of retail transactions are for the sale of goods while the sales of services account for more than 60 percent of the tax base.

Thus, when folks ask what kind of rate would Hawaii need if it were to adopt a retail sales tax like those found on the mainland, the response is something on the order of 10 percent to 11 percent in order to generate the same amount of revenue that the general excise tax rate at 4 percent now generates. This is because the service portion of the base is one and a half times the size of the goods portion of the base.

Thus, if the service portion of the base is not taxed, the current rate would have to be increased by a rate one and a half times the rate applied to goods or 6 percentage points for a total of 10 percent.

That would make Hawaii鈥檚 鈥渟ales tax鈥� rate higher than the number one state of Tennessee which stands at 9.44 percent. Unfortunately the readers of the NCPA newsletter did not have the opportunity to read the Tax Foundation鈥檚 complete report and probably believe that Hawaii has a low 鈥渟ales tax鈥� rate by comparison to all the other states which impose a 鈥渟ales tax.鈥�

For those of us who have worked with the general excise tax, we can attest to the fact that the general excise tax is one of the reasons why it is so costly and difficult to do business in Hawaii. The tax extracts its due without regard to profitability or sustainability. It is as some have described, 鈥渁 beautiful beast,鈥� producing generous revenue with such a low rate.
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About the author: Lowell Kalapa is the President of the Tax Foundation of Hawaii.

Community Voices aims to encourage broad discussion on many topics of community interest. It’s kind of a cross between Letters to the Editor and op-eds. This is your space to talk about important issues or interesting people who are making a difference in our world. Columns generally run about 800 words (yes, they can be shorter or longer) and we need a photo of the author and a bio. We welcome video commentary and other multimedia formats. Send to news@civilbeat.com.

The post Hawaii’s ‘2nd Lowest’ Sales Tax Is Really Among Highest appeared first on 天美视频.

Those very observers who are concerned about the high cost of housing in Hawaii seem to throw up every roadblock possible to thwart efforts that would otherwise increase the supply of affordable housing units. Government itself, which seems to lead the cry for more affordable housing units, imposes a labyrinth of permitting and zoning requirements that impede the development of those affordable housing units.

For example, one nonprofit organization which does nothing but develop affordable housing waited seven and a half years to secure all the necessary permits and zoning changes before it could put its first shovel in the ground. And when it went to the 鈥渢op鈥� to accelerate the process after waiting two and a half years, the bureaucrats denounced the nonprofit as wanting special treatment, a point the nonprofit clarified as being accorded 鈥渟pecial treatment鈥� under the state鈥檚 affordable housing statute, HRS chapter 201H.

Then there are those concerned citizens who want to get those 鈥渉omeless鈥� campers off of their neighborhoods’ sidewalks, but are not ready to accept a shelter in their 鈥渂ack yard.鈥� Get the homeless out of their back yards, but just make sure they are not allowed in 鈥渕y neighborhood.鈥�

Otherwise known as the NIMBY (Not in My Back Yard) syndrome, these folks have identified the problem, but they want the solution undertaken some place else than in their neighborhood. But if they want the problem solved, they sure don鈥檛 want to pay for the solution. Unfortunately, the solution will cost all taxpayers something if it is to be solved.

Then there are those well-meaning folks who believe that more affordable housing is needed, but they feel like they got into the pasture and now want to close the gates behind them. An example of this syndrome is the folks in Kakaako or west and central Oahu where they have their own affordable housing but don鈥檛 want any more families to join them because those new units will create traffic nightmares and overcrowding of public facilities such as schools and parks.

Recently a spate of proposals to build new high-rise projects in Kakaako set off protests from residents in neighboring projects saying these proposed projects are going to ruin the neighborhood, create traffic congestion, bring overcrowding and block the views of existing projects. Even the elected representatives of the district joined with their constituents to raise concerns and opposition to some of these proposed projects. However, no one seemed to point out that these proposed high rises would create the 鈥渁ffordable housing鈥� that families sorely need as state law requires the developers of new projects to set aside units as 鈥渁ffordable鈥� for first-time home buyers.

The other point that seemed to be missed in all of this rancor is the fact that the development of new housing means adding value to the real property tax rolls, not to mention the economic activity that would create jobs and, therefore, state tax revenues on income earned by the workers on the project as well as the money that they would then spend in the economy.

If the residents of some of these adjacent properties believe that they will lose that priceless view from their apartments or have to suffer traffic congestion, then perhaps the real property assessor has been undervaluing their homes which have that priceless view and currently little traffic around their condominiums.

Speaking of traffic, that is one of the major arguments folks out in central and leeward Oahu make about further development in that area. Is this argument of traffic congestion an indictment that the proposed rail system is not going to work and, therefore, additional development should not occur? If, in fact, the proposed rail system is on track to be up and running within this decade, then by the time the new developments come on line much of the imagined traffic congestion should be relieved by the proposed mass transit system.

Finally, the most important issue that stands in the way of creating more affordable housing is if not here or there, then where will that housing be built? If not in Kakaako or central Oahu, shall we put up a high-rise on the windward side up against the Koolau Mountains?

If the public and their elected officials continue to oppose reasonable development of housing, then certainly Hawaii is doomed to have little, if any, affordable housing.

About the author: Lowell Kalapa is the President of the Tax Foundation of Hawaii.

Community Voices aims to encourage broad discussion on many topics of community interest. It’s kind of a cross between Letters to the Editor and op-eds. This is your space to talk about important issues or interesting people who are making a difference in our world. Columns generally run about 800 words (yes, they can be shorter or longer) and we need a photo of the author and a bio. We welcome video commentary and other multimedia formats. Send to news@civilbeat.com.

The post Questionable Paradox for Affordable Housing? appeared first on 天美视频.

Prior to 1977, if anyone wanted to know if some federal Code provision was applicable for state income tax purposes, they needed a complete set of public laws going back nearly 20 years as Hawaii law adopted provisions of the federal law that either established that provision or amended a provision that had been adopted for state income taxes. Thus, as the years went by the task of determining what was applicable for state income tax purposes became more and more arduous.

Realizing that using the federal public law to determine if a federal provision was operable for state tax purposes was impractical, the Legislature decided to conduct a study of just what was or was not applicable for state purposes and then list those sections of the federal law that did apply to Hawaii. This task took nearly an entire year to accomplish, but it formed the basis for the modern-day form of what is known as conformity to the federal Code. Rather than listing those sections of the federal law which are effective for state tax purposes, the conformity provision announces that all of 鈥渟ubtitle A of chapter 1鈥� of the federal Code is operable for state income tax purposes EXCEPT for the list of Code provisions listed in the statute. This way the practitioner merely has to check to see if the section of the federal law he is trying to apply is on or is not on the list.

A couple of years ago as the state sank into the morass of a budget shortfall, lawmakers seemed to turn a blind-eye to many of their own policies, one of which was its former religious adherence to maintaining conformity between the state and federal law as a means to generate additional revenue.

Although the federal government had recently repealed a limitation on the amount of itemized deductions, at the end of 2009 local lawmakers thought it might be a good way to raise the much-needed revenue to fill the gap. So in the 2011 legislative session, lawmakers adopted a temporary limitation on the amount of itemized deductions that could be claimed by high-income taxpayers. They imposed a limit of $50,000 in itemized deductions under section 68 of the Internal Revenue Code (IRC) on couples with $200,000 of federal adjusted gross income (FAGI); $25,000 for taxpayers filing a single return or married persons filing separately with a FAGI of $100,000 or more; and $37,500 for taxpayers filing as a head of household with FAGI of over $150,000. The limitations were applicable to tax years beginning after 2010 and not for tax years beginning after Dec. 31, 2015.

This was not the first time lawmakers tried to impose such limits. When they tried to do so in 2010 the proposal was nixed by then Governor Lingle who called it 鈥渁 defacto tax increase that will adversely hurt certain individuals and businesses at a time when we should be encouraging investment and spending to recharge the economy. The tax increase not only impacts taxpayers, but also disincentivizes activities such as charitable giving and home ownership. Since itemized deductions are allowed for qualifying medical and dental expenses, contributions to qualifying charitable organizations, payment of certain taxes, home mortgage interest, and qualifying job-related expenses, capping the deduction will act to discourage these expenses. Nonprofit and charitable organizations that depend on contributions to serve needy populations are particularly concerned that their ability to raise funds through donations and charitable giving would be adversely affected.鈥�

One of the unintentional consequences of the limitation on itemized deductions was for charities that benefitted from the good hearts of taxpayers, especially the wealthy taxpayer who just happened to have 鈥渟pare change鈥� to donate thousands, if not millions, of dollars, to see their donations disappearing. Charities and other nonprofit organizations took this phenomenon to lawmakers in the first year after adoption noting that they were seeing their contributions from generous donors disappear. And while lawmakers held a hearing on the issue in the middle of the session, the issue went nowhere.

Finally, the plea was made to the administration who proposed a change this past year. With a lot of pressure from nonprofit organizations and charities, the bill sailed through this year鈥檚 session. The bill lifted the limitation of itemized deductions with respect to charitable contributions and became law. However, the overall limit on all itemized deductions will remain through 2015.

About the author: Lowell Kalapa is the President of the Tax Foundation of Hawaii.

Community Voices aims to encourage broad discussion on many topics of community interest. It’s kind of a cross between Letters to the Editor and op-eds. This is your space to talk about important issues or interesting people who are making a difference in our world. Columns generally run about 800 words (yes, they can be shorter or longer) and we need a photo of the author and a bio. We welcome video commentary and other multimedia formats. Send to news@civilbeat.com.

The post ‘Pressure’ From Nonprofits Puts State in a Tax Quandary appeared first on 天美视频.

Of course, the most attractive way for lawmakers to claim that they did something for the economy is to grant tax 鈥渂reaks鈥� to certain taxpayers or, in the case of that last few years, certain industries.

After all, these mechanisms could be adopted without lawmakers ever having to appropriate a dime of taxpayer dollars.

At least that was the perception since adoption of this legislation did not require money to be appropriated as part of the state budget and because there was no way to accurately quantify how much these tax breaks would cost the state. So it took on the aura of getting something for nothing.

As taxpayers learned in hindsight, those tax breaks had everything to do with how much the state had to spend and, as the economic times took a nose dive, those lost revenues resulted in lawmakers having to raise additional revenue just to meet the bare necessities of state services. While lawmakers did not resort to increases in the more obvious taxes, such as the general excise tax or an across-the-board increase in the net income tax, they did target certain taxpayers and certain activities for tax increases. They also resorted to fee increases.

One would think that lawmakers would have learned a lesson from the spate of tax incentives they adopted during the first decade of this century. The lesson being that those tax incentives sapped the state treasury and forced lawmakers to shift the tax burden to others. But tax incentives abound especially where there is an emotional appeal. For example, the current fad is to subsidize local farmers with all sorts of events and campaigns that emphasize 鈥渇arm to table.鈥� And there is nothing wrong with encouraging eating locally produced produce and livestock. The problem is utilizing the tax system to provide those subsidies and supports.

For example, during the last session a number of bills were introduced to exempt various agricultural activities from the general excise tax, including slaughterhouses and the processing of poultry and livestock in the state, provided that they were also consumed in the state. Generally, exemptions from the general excise tax are granted when the tax would impose an unusual burden or would otherwise cause a taxpayer to do business in an inefficient manner just to circumvent the tax. Exemptions from the general excise tax are also granted if the entity is a nonprofit or if the tax imposed would have a severe economic impact on the state鈥檚 economy. The proposed exemption for slaughterhouses and poultry processing facilities met none of these criteria.

It should be noted that the general excise tax rate imposed on producing and processing is already levied at the lesser 0.5 percent rate. Thus, the exemption would have brought little financial gain for these taxpayers. The other point to remember is that the lesser rate does provide economists, planners, and industry officials with important information about the industry 鈥� the size, economic impact, and growth statistics. All of this information would be lost if the exemption had been adopted.

That said, lawmakers need to take a good look and see that, on one hand they are scrounging for money and attempting to raise new funds with everything from user fees to taxes on specific groups of people and, on the other hand, they are attempting to give away the state treasury with exemptions like the one proposed for slaughterhouses and poultry processing facilities. Lawmakers should remember that the tax system is not designed to provide a lure to attract taxpayers into doing or acting in some sort of unusual way. The tax system exists to raise the funds necessary to operate government.

Instead of attempting to give away the state treasury with such myopic tax breaks, lawmakers need to pay more attention to the overall economic climate of the state, which currently suffers from a continuing burden of taxes and regulations.

Lawmakers should remember, giving a tax break to one type of activity comes at a cost to all other taxpayers not so favored unless they are willing to effect a commensurate decrease in state spending. So one has to ask, what is the unusual burden of taxes borne by this particular industry or activity, or are these proposals nothing more than pandering to the fad industry of the day? There is literally no justification for proposals such as this one or any other, including those for high technology and research.

About the author: Lowell Kalapa is the President of the Tax Foundation of Hawaii.

Community Voices aims to encourage broad discussion on many topics of community interest. It’s kind of a cross between Letters to the Editor and op-eds. This is your space to talk about important issues or interesting people who are making a difference in our world. Columns generally run about 800 words (yes, they can be shorter or longer) and we need a photo of the author and a bio. We welcome video commentary and other multimedia formats. Send to news@civilbeat.com.

The post Don’t Give Away the State Treasury Just to Help a Few Industries appeared first on 天美视频.