Archive for February 2011

Tax Watch: Tweaking the general excise tax

February 22, 2011

In the 2011 Hawaii Legislative Session, there are numerous, confusing proposals to increase, decrease, exempt, and fine-tune the General Excise Tax (GET). The GET is the tax we pay on goods and services at every level of production, from wholesale to retail, including taxes on the taxes we pay.

Here’s a quick run-down of proposed bills that affect the GET (let me know if I missed anything):

NEW General Excise Taxes have been proposed for hospitals, infirmaries, and sanitaria (HB178); income from a life settlement, bank-owned life, or corporate-owned life insurance policy issued after 6/30/11 (HB798); and a host of currently exempt organizations – see Part III, including service and facility providers for the homeless, public service companies, public utilities, fraternal benefit societies/associations, and more (SB1532).

General Excise Tax EXEMPTIONS have been proposed for fuel sold from a foreign-trade zone to common carriers for use in interisland air transportation (HB123); local agricultural products (HB286); transactions between a common paymaster and related persons (HB848 and SB1107); federally tax exempt companies that supply potable water (HB911); food and medical services (SB269); intermediary business transactions (SB849); fundraising activities by charitable organizations (SB850 and SB853); and food (SB852).

General Excise Tax SURCHARGES have been proposed for country water infrastructure at 0.5% (HB460); and commercial activity that utilizes the State’s ocean resources at 1% (HB698).

General Excise Tax INCREASES have been proposed at an additional 0.5% (HB567); and an additional 1% for five years (HB1631).

The Legislature also offers some CREATIVE General Excise Tax proposals, like a five-year exemption for qualified small business manufacturers (HB183); an annual exemption for qualified school supplies, computer supplies, clothing, and books “beginning on Wednesday of the last full week of July and ending in 5 days on the following Sunday” (HB364 and SB755); a four-year reduction in the General Excise Tax rate to 1% (HB799); a repeal of the 0.5% Honolulu transit surcharge offset by a 5% casino gambling tax (HB1536); and tax holidays for 3 days during each of four specified weekends in March, June, September, and December (SB851).

These ideas may be helpful (or not), and save us money (or not), but they make the tax code even more complicated and confusing for everyone.

Instead of trying to tweak it, let’s repeal the Hawaii GET entirely – and replace it with a reasonable state sales tax on retail-level goods and services, excluding food, drugs, and medical services. That makes a lot of sense to me, and it would benefit everyone.

Let's Repeal the GET

Please contact your elected representatives by mail, email, or phone, and tell them that we can’t afford the GET we have, much less confusing changes to the GET tax code. Contact your representatives in the House and Senate.

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Popping open specialty restaurants

February 15, 2011

Listening to Krater 96 Radio one morning, I learned about “pop-up restaurants” – small, short-term, shoe-string restaurants which focus on food, not service or ambiance. These restaurants take advantage of closed restaurants or underused kitchens, popping up in unexpected places. Some have self-service tables, where you get your own cutlery. All of them allow chefs to be more creative and try out new ideas.

Then I thought about seasonal stores at the malls – stores which open for a few months during the holidays, like the perennial Hickory Farms outlets, Price Busters’ The Seasonal Store, and Toys “R” Us Express. It’s a win for everyone: malls can lease unused space, stores have a great location, and shoppers have access to seasonal products.

Why not merge the two ideas – pop-up restaurants and seasonal stores? The University of Hawaii, local culinary schools, and even the Hawaii Visitor’s Bureau could partner to create incubator restaurants and “culinary parks” to help local restaurants and chefs.

Here are just three ways that short-term restaurants can help our economy:

* Incubator restaurant spaces. A start-up restaurant would be stocked with basic cooking appliances and furniture. Entrepreneurs could sign 1, 2, or 3 month leases to try out a new restaurant, without taking a big financial risk. If it’s successful, the owner would have some credibility with potential investors and bankers, and could look for a permanent restaurant space.

* Seasonal or themed restaurants. Existing restaurants could offer short-term, seasonal dining experiences or try out new dining themes. Chefs could focus on specialty foods like moon cakes, mochi, or manju or complete menus for Chinese New Year, Mardi Gras, Bon Festival, Oktoberfest…

* Highlight up-and-coming chefs. What a great way to showcase recent graduates – by letting them run their own restaurant and prove themselves to future employers. Chefs can even build a following – hungry fans who are willing to follow them from one restaurant to another.

It could be a great idea for Hawaii – helping start-up restaurants, promoting local chefs and cuisines, and building Hawaii as a unique culinary destination. Are you ready to eat?

Solutions from “The Conscience of a Libertarian”

February 8, 2011

Last week, I reviewed “The Conscience of a Libertarian” (2009), but I couldn’t fit all of Wayne Allyn Root’s reform ideas into a book review.

Root suggests ways to reduce the federal government’s payroll, reform Congress and the Legislature, and downsize government, but I’d like to highlight his Economic Stimulus Plan (pages 240-243).

A seven-point plan to stimulate the economy:

1. Create a One Year Federal Income Tax Vacation. Did you know that we pay around $1.3 trillion in taxes each year, but according to CNN Money we’ve already spent $3 trillion (and committed $11 trillion) in stimulus, bailouts, and guarantees.
–> Could Hawaii afford a one year income tax holiday? Probably not. But maybe we could try a six month payroll tax holiday to help small businesses.

2. Institute a five-year Capital Gains Tax Phase Out, to encourage investment and economic expansion.
–> Could Hawaii eliminate state capital gains taxes? Absolutely. Capital gains are earned on after-tax money and are already taxed at the corporate level (before dividends are distributed).

3. Eliminate all capital gains taxes on investments, dividends, and interest for people aged 55 or older. This would help older Americans in their retirement and encourage all Americans to invest their money.
–> Could Hawaii eliminate capital gains taxes for seniors? Absolutely, though I think an across-the-board cut would be better. The money they keep could make a big difference for people on a fixed income.

4. Cut the federal business income tax to 20% (or lower) for large businesses and 10% (or lower) to encourage small businesses.
–> Could Hawaii cut business taxes? Why not? This could replace business tax credits for special interests – I mean special industries – and help attract new businesses to Hawaii.

5. Eliminate capital gains taxes on the profits from the sale of principal residences, to encourage the housing market and home sales.
–> Could Hawaii eliminate state capital gains on home sales? A principal home is not a luxury; and homeowners take all the risks of their “investment” with after-tax money.

6. Offer a $7,500 tax credit to any employer who hires a new full-time employee, and a $10,000 tax credit if the person they hire was out of work at the time. This would encourage new job creation and hiring.
–> Could Hawaii offer a new hire tax credit? Yes, though a payroll tax holiday would help all businesses.

7. Create a national flat tax with only two tax rates: 15% on all income up to $500,000, and 10% on all income above $500,000. Instead of punishing success, this reverse flat tax would reward success.
–> Could Hawaii enact a flat state income tax? It would certainly reduce paperwork and simplify tax returns. Hawaii has one of the highest income tax rates in the nation, while seven states have flat personal income taxes. But I’m not convinced about the reverse flat tax.

Do any of these stimulus ideas make sense for Hawaii? What are your ideas for Hawaii’s economy?

“The Conscience of a Libertarian” by Wayne Allyn Root

February 5, 2011

I’m an independent voter, frustrated with both Democrats and Republicans, so I was curious to read “The Conscience of a Libertarian: Empowering the Citizens Revolution with God, Guns, Gambling, and Tax Cuts” (2009) by anchorman, commentator, and 2008 Libertarian Party vice presidential nominee Wayne Allyn Root.

Inspired by Barry Goldwater’s “The Conscience of a Conservative” (1959), Root claims to be an “equal opportunity anti-politician” (page xxxi) and calls for a return to citizen legislators. According to Root, Libertarianism is not about anarchy (having no government), but about having a minimal federal government with most of the power residing with the state governments.

The book is divided into four sections: A Revolution is Brewing introduces Barry Goldwater, Conservatism, and Root’s Libertarian awakening; Let’s Talk Money and Politics discusses the Nevada model of low taxes and small government, California’s problems, the trouble with lawyers, and bailouts; Solutions for the Mess We are In outlines specific actions to reform unions, Congress, and the Legislature, downsize government, and stimulate the economy; and Protecting and Preserving Our Inalienable Civil Liberties debates government’s intrusion in our lives, education, health care, affirmative action/reverse racism, global warming, energy, and gambling.

From lists of federal government agencies that he would eliminate, to specific reforms for unions, Congress, and the Legislature, Root has idealistic and radical ideas for making government leaner and more efficient.

Root suggests the most immediate, practical, and all-inclusive solution for economic stimulus that I have ever heard:

* Give every US taxpayer a one-year tax vacation. I was absolutely stunned to realize that the $9 trillion-plus money we have spent in bailouts and stimulus bills could have more than paid for a one year tax vacation for all taxpayers! (page 238)

And he offers two tantalizing alternatives to federal income taxes:

* Impose a tax on each state in proportion to its population for federal revenue, and eliminate federal income and payroll taxes. Each state would decide how to raise its share of the money, but states would be prohibited from taxing interstate commerce (pages 170-171); or

Create a national flat tax with only two tax rates: 15% on all income up to $500,000, and 10% on all income above $500,000. Instead of punishing hard work and success, this reverse flat tax would reward success and achievement (page 238).

“The Conscience of a Libertarian” is passionate, outraged, and sometimes controversial. The book is a little long and sometimes reads like a detailed campaign brochure, but Root proposes some appealing and reasonable solutions that challenge us to reform our government, our political process, and taxes.

Grading public schools differently

February 1, 2011

Every year, we hear disheartening news about Hawaii’s public schools. The 2010 Hawaii State Assessment reports that 67% of students are proficient in reading and 49% of students are proficient in math. Happily (or sadly), that’s an improvement over last year.

It’s hard for parents to decide which public school is right for their children.Right now, we have two ways to impartially grade the performance of our public schools: test scores and satisfaction surveys.

The Hawaii state Assessment reports are based only on standardized reading and math tests for more than 93,910 students in grades 3 through 8 and grade 10.

Honolulu Magazine’s annual “Grading the Public Schools” takes the grading system one step further, by including satisfaction scores from teacher, parent, and student surveys. The surveys ask questions such as “I am satisfied with the overall quality of this school,” “I am satisfied with the variety of courses and programs offered at my child’s school,” and “Overall, this is a good public school.”

The standardized scores and satisfaction surveys are a great start. But let’s also grade schools in different ways.

To measure school performance:
* Number of courses offered
* Number of students per class
* Number of extra-curricular activities and clubs
* Percent of students with parents who attended the school

To measure teacher commitment:
* Percent of teachers with degrees in the subjects they teach
* Percent of teachers with children in public schools

To measure student achievement:
* Percent of students with at least 95% attendance
* Percent of students that engage in extra-curricular activities and clubs
* Percent of students accepted to college

To measure parent involvement:
* Percent of parents who attend parent-teacher conferences
* Percent of parents involved in the school’s Parent-Teacher Association

This updated “report card” shouldn’t cost anything. The Department of Education already has most of this information; it just needs to be collected, or a few questions added to the satisfaction surveys.

Standardized test scores aren’t the only (or best) measure of a school. What are other ways can we look beyond test scores to evaluate our schools?