The Pathway to Tax Hell Is Paved with Good Intentions!

by Keli'i Akina, Ph.D., President/CEO, Grassroot Institute of Hawaii February 12, 2016

Recently, we at Grassroot found ourselves in the unenviable position of cautioning the legislature against adopting popular bills for education (SB 2599) and elder care (SB 2478).  It's not that we have any problem with the supposed good intentions of these bills. After all, who could be against the kupuna  and the keiki?

The problem is that the means chosen to accomplish these good intentions is a raise to the general excise tax--a 0.5% surcharge to help fund long-term care and an outright increase from 4% to 5% to pay for the education initiative. Taken together, these bills would raise the GET by 37.5%. 

It's an increase that would end up hurting many kupuna who struggle to make ends meet and affecting keiki for generations to come.  Raising the GE tax will also lower the state's business tax climate rating and also drop Hawaii's sales tax rating from last in the nation to ... well, there's nothing lower than last, is there?

The real solution needed to provide the goods and services that the people of Hawaii (including children and the elderly) require is for the state to promote the practices of free market economics. For example, instead of removing cash from the economy by taking it away from taxpayers and businesses, we need to recognize our citizens for the resource that they are. By broadening the tax base and cutting taxes, the state actually has the potential of bringing in more revenue while lessening the burden on the individual taxpayer. Innovation and development come from people, not from taxes.

Education reform and caring for the elderly need better solutions than the knee-jerk governmental response of throwing money at the problem. We've already demonstrated that we can neither tax our way to prosperity nor solve our social problems by blanketing them with tax dollars. Instead, let's look at reform in terms of results, not as a way to grow the government.

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Grassroot Asks Legislature to Stop Using the GET as a Fundraising Tool

Watchdog group offers comments on two separate bills that would raise taxes 

News Release from Grassroot Institute

HONOLULU, HAWAII--February 11, 2016--The Grassroot Institute is urging legislators to consider different ways of raising revenue for the state rather than relying on raising the general excise tax to pay for new initiatives. In comments on two separate bills being heard this week, the watchdog group offered testimony demonstrating that the state's regressive GET places a heavy burden on the economy and the least fortunate and cautioned that continually raising the tax could have dire consequences.

Grassroot offered testimony on two bills before the Senate, SB 2478, which envisions a 0.5% surcharge to pay for a long-term care benefits program and SB 2599, which would raise the GET from 4% to 5% in order to pay for a series of education initiatives.

"Hawaii's regressive general excise tax is widely cited as one of the biggest detriments to small business and entrepreneurship in the state," said Keli'i Akina, Ph.D., President of the Grassroot Institute. "Our state is regularly ranked at or near the bottom in national surveys of both the fairness and the economic desirability of our sales tax model. Not only does it act as a drag on the economy, but it hits the poor and disadvantaged harder than any other group, costing about 11% of the family income for the lowest 20% of earners."

Dr. Akina continued: "Despite this, legislators regularly look to GET raises and surcharges as a way to pay for expensive new state initiatives. Yet, the data shows that raising consumption taxes is a tricky thing and does not guarantee an equivalent boon in revenue. While providing for the elderly and improving education are both worthy goals, we must look for new and innovative ways to accomplish reform. Asking the taxpayers of Hawaii to continually open their wallets for new projects is short-term thinking that will only lead to long-term budget problems."

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About the Grassroot Institute of Hawaii:

Grassroot Institute of Hawaii is a nonprofit, nonpartisan research institute dedicated to the principles of individual liberty, the free market, and limited, accountable government throughout Hawai`i and the Asia-Pacific region.  Read more about us at http://www.grassrootinstitute.org/

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About Grassroot President:

Keli’i Akina, Ph.D.,  is a recognized scholar, educator, public policy spokesperson, and community leader in Hawaii.  Currently, he is President/CEO of Grassroot Institute of Hawaii, a public policy think tank dedicated to the principles of individual liberty, free markets and limited, accountable government.  An expert in East-West Philosophy and ethics, Dr. Akina has taught at universities in China and the United States and continues as an adjunct instructor at Hawaii Pacific University.  Dr. Akina was a candidate for Trustee at Large of the Office of Hawaiian Affairs in the 2014 General Election run-off.