Transit History

by Tom Yamachika, President, Tax Foundation Hawaii

This week, I’m going to do something a little different. I’m going to trot out an analysis that was done by one of my predecessors. Who and when will be revealed later. (My comments on how they relate to today’s situation are in parentheses.)

“Rapid transit for Honolulu is the most costly single project ever contemplated by either the State or the City.” (It still is. And you would cry if you saw the estimated price tag, which will be revealed later as well.)

The City’s transit consultants were trying to figure out how the State and City were going to pay for their portion of the cost, which at the time was 1/3 of the total price with 2/3 to be paid by Uncle Sam. (Fat chance of the Feds giving us that much now.)

“The consultants’ analysis of the tax sources prompted them to drop 11 of the possible revenue sources from the original list: personal property tax (which we still don’t have, thank goodness); tax on parking lots (we do have the GET hitting those); tax on office space (we have the GET on rents, which is almost as good); increase in the public utility franchise tax; privilege tax on telephones (these days even a cell phone seems more like a necessity); excise tax on realty transfer (we now have a conveyance tax which is orders of magnitude larger than it was in those days); increase in charges on licenses and permits (happens all the time these days); increase in tobacco tax (seems to happen often); increase in liquor tax (same); employer tax on the number of employees; and a payroll tax (those would be really bad, but we wonder if minimum wage increases are doing the same thing in terms of economic impact).

“THE EIGHT tax sources remaining and listed in the apparent order of priority of the consultants are: 1) increase the passenger vehicle weight tax (we’ve done that); 2) increase the county motor vehicle fuel tax (we’ve done that, and we are bracing for more, as we reported last week); 3) increase the real property tax rate (we’ve done that); 4) levy a special one-time tax on autos (who’s going to bet that it won’t be one-time); 5) impose a hotel room tax (we did that, starting at 5% and now it’s up to 10.25% plus the counties can add on another 3%); 6) levy an additional sales tax on top of the present 4 per cent (attempted often and failed often, but a county surcharge did pass in 2006); 7) impose a surcharge on income tax (when this piece was written, the top income tax rate in Hawaii was 11%; it since went down somewhat but crept back up again, and our top income tax rate in Hawaii is 11% today as well); and 8) abolish the home owner’s exemption of real property valuations (probably political suicide then as well as now; we wonder what the consultants were smoking).

“Also, the consultants’ report states study is going on in the area of a transit taxing district. They are studying the feasibility of securing revenues from special transit beneficiaries by taxing their gains due to close proximity to transit stations. (The Board of Education jumped on this one real fast, establishing an ‘impact fee district’ to let them tax developers in the area, as we reported on a while back.)”

For those of you who were wondering, the original article was written by Fred Bennion, former President of the Tax Foundation of Hawaii, and it was published in the Honolulu Advertiser and Star-Bulletin on June 25, 1972, nearly fifty years ago. At that time the total project cost of rail transit was estimated at $700 million. Yes, with a “M,” not a “B.” In those fifty years, look how far we’ve come!

Or not.