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Sunday, January 20, 2013
Instill Priorities for Precious Tax Dollars
By Lowell L Kalapa @ 5:53 AM :: 4335 Views :: Taxes

Instill Priorities for Precious Tax Dollars

by Lowell L. Kalapa, Tax Foundation of Hawaii

Well, they are off and running, the Congress and the state legislature that is. True to years past, each bright, shiny and eager face will have an agenda to deliver to his or her constituents back in their home districts. That means money!

In years past, when the nation and the state had resources to blow, no one paid attention and, in fact, constituents clamored to have lawmakers fund this or that new program. But the awful truth has come home to roost - there is no such thing as a free lunch. As we witnessed recently, the federal government nearly went over the “fiscal cliff” and someone has to pay for the services provided by the federal government. But by allowing tax rates to rise on the wealthy top four or five percent of Americans, Congress and the administration proverbially “kicked the can down the road.”

Sometime around the end of next month, the very same cast of characters will again lock horns over the issue of whether or not to raise the debt ceiling to cut spending even further. On one hand, some argue that if the debt ceiling is not raised, we won’t be able to pay our troops, those with student loans will go into default, and beneficiaries of Social Security and Medicare will not see their benefit checks arrive in the mail or credited to their checking accounts, and generally the economy will slip into a financial abyss. Americans are being warned that this would create a financial and economic disaster. However, no mention is made about what the outcome would be as the nation continues to accumulate more debt because it continues to spend.

Fortunately, the state of Hawaii cannot adopt a deficit budget and spend money it does not have. However, that does not mean that state lawmakers have control on the pace of spending. What is already a given is the fact that the state is faced with a huge tab for the unfunded liabilities of the state pension and health care systems. This yoke around the neck of lawmakers is sizably estimated to be more than $22 billion and has not been addressed in recent years and continues to grow by the day as more and more public employees retire.

These obligations are unfunded, in large part, because past generations of lawmakers have taken the monies that should have been paid toward this obligation and used those funds to initiate new programs and services, services and programs that perhaps were not as critical to the health and safety of the community as others such as education, child welfare, sanitation inspection, and vector control. But a very vocal group of constituents demanded that lawmakers provide these services and they acquiesced as these voters are the very people who elect them to office and if they want to be returned to office, lawmakers need to pander to these constituents.

The problem is that just as much as these lawmakers believe that they must respond to their constituents= demands, they must also recognize that they have a duty to insure that what precious tax dollars they have been entrusted with need to be spent wisely and efficiently, yielding the best possible services for those few dollars. It also means that elected officials at all levels of government must set priorities for what few dollars are available.

Setting priorities not only means deciding which services are most critical to the health and safety of the community, but it also means that when the funds to be spent run out, elected officials have the courage to say no to programs that are not of a significant priority. While saying no may be hard to do, what is the alternative? Saying yes to more taxes and fees? Teachers are already calling for another “penny on the sales tax.” After all, it is only a penny. Similarly, the advocates of early childhood care and education are calling for another “penny.” And while it only sounds like a paltry “penny,” it means millions and millions of dollars ripped out of the state economy that could otherwise be put toward expansion and growth of the economy, creating jobs and new activities that would generate the necessary tax revenues. But that’s money out of the economy, an economy upon which we rely to generate those tax revenues.

Instead of falling into their usual habit of spending more of your tax dollars and then trying to figure out how they can raise more money, lawmakers should be required to recommend a reduction or elimination of a current program or service on a dollar-for-dollar basis if they want to adopt a new program or service. After all, Hawaii taxpayers already bear one of the heaviest burdens in the nation. It is time that those taxpayers demand that elected officials also represent the overburdened taxpayer and demand that elected officials do their part and rein in the spending or else we, as a state, will also be faced with a “fiscal cliff.”

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