Posted tagged ‘Taxes’

2018 Hawaii Legislative Watch: Taxes

February 27, 2018

Opening Day for the Hawaii State Legislature was on January 17 – the same day, 125 years ago, that the Kingdom of Hawaii was overthrown.

Slightly less outrageous is the sheer number of bills that are active in the 2018 Hawaii Legislature, which seems to multiply over the years. There are 4,948 current 2017 and 2018 Bills (2,621 House and 2,327 Senate). There are just 60 legislative days to effectively read, discuss, re-write, absorb testimony, and vote on these bills.

For the past few years, I’ve read through the bill summaries to find out about the bills being proposed that affect our money, education, and rights. I rely on these summaries to accurately reflect the legislators’ intentions. This year, instead of compiling an overview, I decided to narrow it down to the bills that I think need the most consideration and debate.

 Here are three significant tax bills to watch in the 2018 Legislative Session. If I’ve missed any tax bills that you think we need to keep our eyes on, please let me know!

1. Would you pay higher taxes for public education? There are a number of tax proposals that want to raise money for public education by adding a surcharge on residential investment properties and visitor accommodations (HB180 HD2, HB182 HD2) or by increasing the general excise tax (GET) by 0.5% (SB1132). As a public good, everyone pays for public education through state income taxes and the GET. Even with strong, fundraising parent-teacher groups, the schools are always in need of more money. Is it fair to require homeowners, including non-residents, to pay higher taxes for a service that is unrelated to their home or property? Is it effective to create a dedicated funding source that has little oversight by Hawaii legislators and taxpayers?

2. Tax over-reach on out-of-state businesses. In an effort to raise more tax revenue, the Legislature is looking to tax retailers or vendors that are not Hawaii businesses – but who may have customers in Hawaii. I think this is a blatant tax overreach. Some bills would require retailers or vendors to submit an annual report to Hawaii (HB398 HD2) or even collect GET (HB345, HB2417, SB161, SB620 SD2 HD2), or create a “marketplace provider” designation for businesses with sales over $100,000 from Hawaii residents (SB2871, SB2890). I think that these bills are a tax over-reach because they tax interstate commerce and attempt to impose taxes on businesses without representation in Hawaii. It places an unfair burden on businesses to be in compliance with Hawaii tax laws.

I hope that if other states attempt to tax Hawaii businesses that do business in their state, but do not have a business presence, our Hawaii legislators will protect us from their tax over-reach.

3. General excise tax (GET) vs. sales tax debate: Some people support the GET, because it has a wide tax base and spreads the burden of taxes to everyone. For just this reason, I think that the GET is unfair – it taxes every level of production, from wholesale to retail, and forces businesses to pay taxes on the taxes it collects! Instead, I support a reasonable sales tax, one that only taxes goods and services sold to the end-user, and affects taxpayers according to how much they consume. So I hope that HB2615, which would require the Tax Review Commission to conduct a feasibility study on whether the general excise and use tax laws should be replaced with a sales tax, gets some support from the Legislature this year.

The 2018 Hawaii Legislature adjourns on May 3. Please think about these issues and how they may affect you, everyone around you, and future generations. Whether you have concerns or feel strongly about an issue, speak up, talk about it, and be part of the discussion!

Advertisements

We’re growing the wrong tax tree

April 11, 2017

I published this post in 2010 and again in 2013. For those of you who are new to Better Hawaii, and for all of us who could use a reminder, I think it’s worth repeating.

Let’s ignore, for the moment, the fact that the IRS tax code is over 44,000 pages, is so complicated that even tax experts don’t understand it, and desperately needs simplification. Let’s ignore the benefits of a national sales tax or a flat income tax.

Think about this: like a tree struggling to shade us from harm, our tax system needs more sunshine, more pruning, and a lot less graft.

In fact, we are growing the wrong tax tree entirely.

Our current tax system is an overgrown banyan tree, with roots extending down and spreading over the whole economy. The federal government has higher income tax rates, ranging from 0% to 35%. The states have lower income tax rates, ranging from 0% to 11% – with Hawaii at the top – but are dependent on federal funds and must comply with unfunded mandates.

It makes more sense to have a tax system like a strong pine tree, simple and orderly. The federal government, which has national responsibilities and a larger tax base, should have lower tax rates. The states, which directly care for citizens but have smaller tax bases, should have higher tax rates and not rely on the federal government for funding.

The only rational explanation for this upside-down, overgrown tax code is that the federal government wants the power to redistribute taxes among the states. They want to create welfare states and ensure that states are dependent on the federal government.

Does this make non-sense? Do you have another explanation – or better yet, solution? Does anyone have ideas about how states can reclaim their power and independence from the federal government?

We’re growing the wrong tax tree (redux)

April 9, 2013

I originally published this post on April 6, 2010. For those of you who are new to Better Hawaii, and for all of us who could use a reminder, I think it’s worth repeating.

Let’s ignore, for the moment, the fact that the IRS tax code is over 44,000 pages, is so complicated that even tax experts don’t understand it, and desperately needs simplification. Let’s ignore the benefits of a national sales tax or a flat income tax.

Think about this: like a tree struggling to shade us from harm, our tax system needs more sunshine, more pruning, and a lot less graft.

In fact, we are growing the wrong tax tree entirely.

The Wrong Tax Tree

Our current tax system is an overgrown banyan tree, with roots extending down and spreading over the whole economy. The federal government has higher income tax rates, ranging from 0% to 35%. The states have lower income tax rates, ranging from 0% to 11% – with Hawaii at the top – but are dependent on federal funds and must comply with unfunded mandates.

It makes more sense to have a tax system like a strong pine tree, simple and orderly. The federal government, which has national responsibilities and a larger tax base, should have lower tax rates. The states, which directly care for citizens but have smaller tax bases, should have higher tax rates and not rely on the federal government for funding.

The only rational explanation for this upside-down, overgrown tax code is that the federal government wants the power to redistribute taxes among the states. They want to create welfare states and ensure that states are dependent on the federal government.

Does this make non-sense? Do you have another explanation – or better yet, solution? Does anyone have ideas about how states can reclaim their power and independence from the federal government?

Being flexible vs. breaking promises

April 26, 2011

When is changing your mind considered being flexible? When is it considered breaking a promise?

As a candidate, Hawaii Governor Neil Abercrombie promised not to raise the General Excise Tax (GET) – a tax levied on wholesale, manufacturing, and retail goods, including food and medicine. It’s an unfair, pyramiding tax that forces us to pay taxes on the taxes we pay – but that’s another issue.

Released on August 18, 2010, Abercrombie’s “Recovery and Reinvestment Plan” boldly declared, “The General Excise Tax will not be raised. Given the public’s lost confidence in government, no reasonable argument can be made to raise the GET. Government will have to make better use of the revenues that it has and grow the economy if more revenues are needed.” On September 7, 2010 in a candidate forum, Abercrombie stated, “I’m against raising the GET tax, without equivocation.” The next day in a KITV interview, he confirmed, “We’re not going to raise the GET tax.”

By March 9, 2011, Abercrombie decided that “We’ll just see what transpires.” His spokesman explained, “If a measure to raise the GET passes out of the Legislature because other elements of his plan are not adopted, he will of course consider it as the people’s will.” A week later, on March 16, 2011, Abercrombie admitted that he is “flexible” about raising the GET. His staff clarified, “Raising the rate of the general excise tax is not currently being considered” (emphasis added).

Perhaps succumbing to public criticism, on March 30, 2011 Abercrombie stated that he does not support a GE tax increase, and that we can balance the budget “All without doing the GET.” He said that a GET increase is a bad idea financially and politically – “It won’t wash with people,” he admitted.

I hesitated to write this, because Better Hawaii is focused on challenging people to find solutions, not complain about problems. But in the end, I think that it’s important and worthwhile to discuss when it’s okay to change your mind. I think it depends on whether there is new information or revised circumstances.

So what made Abercrombie re-think his stance on raising the GET?

How much new information was available? We don’t know what new information Abercrombie received as governor; we only know the information released the previous governor. But we already knew about the falling tax collections (for some reason, the government calls this “revenue”), the rising costs of sewer and road repairs, and the problem of unfunded pensions.

How has the situation (the economy) changed? Abercrombie could not have predicted the Japan earthquake and tsunami in March that has led to declining tourism, business slow-downs (for example, the Kona Village Resort has closed indefinitely), and costly repairs. But certainly, Abercrombie knew that we still have higher-than-normal unemployment, lower salaries, furloughs, and a Honolulu rail system that is on track to cost billions of dollars.

Has everything already been done to balance the budget? Abercrombie may think he has done as much as he can. But all I’ve heard about are raiding the Hurricane and Rainy Day funds and programs that Abercrombie wants to “restore.”

On this issue, raising the GET to pay for government, is Abercrombie justified in changing his mind? Do you support or oppose his “flexible” thinking? Should he have changed his mind a second time, back to his original stance?

Join a Tax Day Tea Party rally

April 14, 2011

Taxes and more government spending aren’t the answer to our economic crisis. They may help some people, but only by taking away from others.

Tomorrow on April 15, 2011 the third Honolulu Tax Day Tea Party rally will be held at the Hawaii State Capitol Building from 4-7 pm. On Maui, the second Maui TEA “Taxed Enough Already” Party event will be held at Hoaloha Park in Kahului from 2-6 pm. On the Big Island, the Kona Tax Day Rally will be held on Queen’s Highway by the Kona Hawaii Temple from 4-6 pm; and the Hilo Tax Day Tea Party will be held at the Hilo Bayfront King Kamehameha Statue from 4-6 pm.

Please join Hawaii taxpayers to show your support for fiscal responsibility.

April 6: Celebrating Tax Freedom Day

April 12, 2011

It is with some irony that I write, Congratulations! On April 6, we celebrated Tax Freedom Day, the day that Hawaii taxpayers have earned enough money to pay for this year’s federal, state, and local taxes. The Tax Foundation (www.taxfoundation.org) calculates this date every year using government data on income and taxes, not including the deficit.

According to the Tax Foundation, there are five major tax categories: individual income taxes, payroll taxes, sales and excise taxes, corporate income taxes, and property taxes. We each have work for 96 days just to run our government, but today we are working for ourselves – 6 days earlier than the national Tax Freedom Day on April 12.

Now for the bad news: get out your wallet – by April 15, we have to pay taxes for 2010.

Something to remember: freedom isn’t free, but don’t allow our legislators to price us out of the market!

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.