More Temporary Tax Fixes Considered

by Tom Yamachika, President Tax Foundation Hawaii

The elections have been held.  We know who the new Representatives and Senators are.  The Hawaii legislative session doesn’t open until Wednesday, January 18th, but you’d better believe that legislators have been busy already. 

Unlike in Washington, D.C., our House for some time has picked a Speaker and our Senate has selected its President.  They have organized their respective chambers into committees which, in addition to considering bills and resolutions within their designated purview, are tasked with overseeing various Executive Branch agencies.  The House and Senate money committees, in particular, have been holding informational briefings with the various state agencies, to hear their plans for the upcoming fiscal biennium and to evaluate their budgetary requests. 

At one such briefing on January 4, the Department of Budget and Finance testified that the Green Administration is considering another tax rebate this year, but this one would be targeted to middle-class and low-income residents grappling with the extremely high cost of living here.  (The Hawaii State Tax Watch Doggie points out that Hawaii has the most expensive pizza in the country, which to him is an unmitigated disaster.)

The talk of a tax rebate, however, is far from encouraging.  It indicates that the Administration is now thinking about a temporary solution (a tax rebate) for a permanent problem (stratospheric cost of living).  Another tax rebate might be a sweet-sounding fix for one year, maybe two, and passing one would give lawmakers an excuse to punt for yet another biennium on grappling with the high taxes, costs, and fees that have given us the national spotlight—and not the good kind.

Lawmakers are also considering additional or expanded credits that would give relief to people on the lower end of the income spectrum, such as the food/excise tax credit.  One of the problems with credits, however, is that they tend to be fixed amounts so that after a few years of inflation the credits do progressively less for people receiving them.  Those can also be thought of as temporary fixes.

As we have written before, our lawmakers have a tendency to enact temporary taxes and let them spiral out of control into permanent problems.  Why can’t we use the opportunity that a better economy gives us to enact permanent fixes?

Is the worry that the public worker unions will howl and moan?  Over the years, they howl and moan for more money whether the economy has been good, bad, or indifferent.  Economy bad?  “Our members are suffering and need more pay.”  Economy good? “Our members deserve more pay and you now have the money to pay them.”  Economy indifferent?  Choose either or both of the above narratives.

The English poet John Donne wrote in 1623 that “No Man is an Island.”  It’s true that we are on an island, actually several, but that doesn’t make us lose our connection with the rest of our country and with the world.  Even now we are being compared with other states and countries.  The pizza news that the Doggie found is just one of many examples.  These comparisons motivate people.  They motivate some people to buy a one-way ticket out of here.  Our population continues to decline.  Even our state DBEDT is telling us, based on U.S. Census Bureau data, that we lost thousands of people in the last fiscal year ending June 30, 2022.  There are 42 more people per day moving out of Hawaii to another State than moving to Hawaii from another State.

We need fixes.  Not the temporary kind.