by Lowell L. Kalapa, Tax Foundation of Hawaii

Taxpayers can breathe a sigh of relief as lawmakers turned out the lights on the 2012 session with no major tax increases approved or other types of revenue enhancements awaiting the governor’s approval.

After all, this is an election year with every lawmaker up for reelection as a result of the reapportionment of the legislative districts, an issue that has yet to be resolved. Since no incumbent lawmaker is willing to face the wrath of a disgruntled electorate, lawmakers tended to shy away from any hint of a tax increase. Indeed the electorate is growing more and more sensitive to the rising burden of taxes and fees of the past few years as lawmakers attempted to balance the state’s budget on the back of taxpayers.

While the budget crisis was certainly a result of the sluggish economy and the worldwide recession, there is no doubt that Hawaii, like many of its sister states, created problems over the past twenty-five years by allowing the growth in government to go unchecked, adding this and that program or new service to a palette that was already overburdened with a plethora of programs and services.

While many of those programs and services were added at the height of the economic boom of the later 1980’s and early 1990’s, one would have thought that lawmakers would have tightened the fiscal purse strings when Hawaii hit the first brick wall in the mid 1990’s. Unable to suck the fiscal gut in, lawmakers found society unwilling to pay for the increased costs.

Instead, lawmakers resorted to raiding special funds that they had set up to hide excess tax revenues that they refused to return to taxpayers. As a result, programs which should have been dumped and special funds which should have been repealed were instead installed as permanent features of the state spending agenda. It didn’t matter that many of these programs and services had been at one time provided by private providers when the community got together and did for itself.

This created an entitlement mentality with taxpayers believing that if they were paying so much in taxes, government ought to do more for them. Little did taxpayers realize that the burden was growing heavier and heavier and little did lawmakers understand that the more taxes and fees they levied, the less money there is to circulate in the economy. Because of the panoply of taxes and fees, the cost of doing business has risen which in turn increased the cost of living in Hawaii.

As a result, with more and more of the household budget being spent on the more expensive necessities, there are less and less discretionary resources to buy extras. Voila, a downward spin in the economic activity as consumers tighten their belts as they try to make ends meet. Meanwhile government bureaucrats decry the loss of funding as revenues shrink and they mumble that they can’t do their jobs because there are so many vacancies in their departments. They believe that if they can prove that the public is not being served because they are understaffed, lawmakers will give them more money either in appropriations from the general fund or new fees and user charges so they can ignore the whims of lawmakers.

Such was the case during this past session as various department heads came before lawmakers pleading for new sources of revenues so they could “free-up” general fund dollars. One example was the parking program for the disabled which asked lawmakers to add “another” dollar on the state vehicle registration fee because it would free up a half million dollars of general funds which is currently required to run the program. ZOT, wrong request as lawmakers are still smarting from the complaints from constituents that the ten-dollar increase in the vehicle registration adopted last session was just too much of an increase! And when it was pointed out that there are more than a million vehicles registered in the state, the proposed dollar increase would just double the budget of the program.

Some have argued that if government doesn’t provide a service or program, no one will. The problem with that notion is that when government undertakes a program or service, it usually comes at a cost greater than if the same service was provided by private industry. A good example is the lack of modernizing the information systems of state government, a project that is yet to be implemented despite the findings and recommendations of the state auditor.

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