The Time Tax

by Tom Yamachika, President, Tax Foundation Hawaii

This week we reflect on a piece in “The Atlantic” that argues quite persuasively that your government not only taxes people by taking their money, but also imposes administrative burdens that waste countless precious hours of people’s time.

“The issue,” the article says, “is not that modern life comes with paperwork hassles. The issue is that American benefit programs are, as a whole, difficult and sometimes impossible for everyday citizens to use. Our public policy is crafted from red tape, entangling millions of people who are struggling to find a job, failing to feed their kids, sliding into poverty, or managing a disabling health condition.”

Our own recent struggles with the unemployment system here in Hawaii illustrate this phenomenon. Hawaii Public Radio did an October 2020 story on “Thousands still waiting action on unemployment claims,” One person profiled in the story described the processes of applying for unemployment benefits as a “full-time job.” Civil Beat’s Denby Fawcett told the story of one claimant who called the unemployment office 22 times only to be put on hold for an hour when the person who answered said she needed to consult with her supervisor.

The Atlantic argues that some of this difficulty is by design. Gov. Ron DeSantis of Florida said as much: “Having studied how [the system] was internally constructed … it was, 'Let's put as many kind of pointless roadblocks along the way, so people just say, oh, the hell with it, I'm not going to do that,' …. It was definitely done in a way to lead to the least number of claims being paid out.”

The unemployment office is not the only government agency imposing a time tax on their so-called customers. One of our articles in 2015 profiled our Department of Taxation. Tax is not a simple subject, but it nevertheless operates on a “you figure it out” model as well. When people call in for help, at that time there was a more than 50% chance that their call would not be answered, at all. In fiscal 2020, the Department’s call answer rate crept up to 82%, basically answering five out of six calls (irrespective of waiting time, which wasn’t discussed in the report). At the same time, published guidance by the Department remains scarce, so it is still difficult for taxpayers to search for information to resolve their own problems.

No article on the time tax in Hawaii would be complete without mention of the obscene length of time that Native Hawaiian beneficiaries remain on the waitlist for lease awards of Hawaiian homestead land. Some have been on the waitlist for decades and some have died on the waitlist. Kalima v. State, a 2020 decision by the Hawaii Supreme Court, decided that the State breached trust obligations and needed to pay damages to those on the waitlist. Hopefully this case will lead to some mitigation of the time tax.

Nationally, the Atlantic argues, the time tax is regressive. It falls most heavily on the poor, the less educated, the ethnic minorities. It might be imposed unwittingly. Legislatures pass laws that are carefully drawn to benefit the “right” people, such as those hit by the pandemic. Agencies implementing the laws want to weed out the fraudsters and the liars, and those otherwise not worthy of the benefits. As a result, claimants, assuming they find out about the benefit at all, face an uphill battle in applying for it between navigating through complex qualification requirements and trying to get the application through an agency that is more focused on having a claimant run the gauntlet than in cooperating to get that claimant the benefits allowed by law.

Here in Hawaii, we can and should do better. We need benefits laws that are easy to understand and make sense of. We need agencies that execute the laws to educate the public clearly and thoroughly on what is required to participate. Our agencies should be reasonably responsive to the public. We the taxpayers are not just pigs clamoring around the feeding trough and shouldn’t be treated as such. Overall, lawmakers need to be aware of the time tax and what it does to their constituents. Once they do, maybe they can help make the system better.