TAX MAN: We compete with other states, countries, for people
In the last 10 years or so that I have occupied this seat, I have seen legislatures after legislatures consider countless bills to raise taxes. Every year. For sure. At the foundation, we keep a list of tax bills that are tabled and that get at least one hearing.
The list usually consists of six or seven pages. During the legislative process, most of them are eliminated, like most other bills, but there is always a two or three page list of tax and public finance bills that are sent to the government. governor. Income tax. General excise tax. Temporary accommodation tax. Death tax. Transportation tax. “Sin taxes” on fuel, alcohol, cigarettes. The list goes on.
And when it comes to the level of taxation, Hawai’i is up there. We are tied for the highest tax rate. We have the second highest tax rate (and we would have beaten California if any of the bills in this session had become law). Our general excise tax applies to far more things than any comparable tax in any other state.
When these facts are brought to the attention of lawmakers, they do not seem to care. Why? Probably because they don’t realize, or don’t want to realize, that Hawai’i has to be competitive. For the people.
Hawai’i was once an island kingdom, a world in itself. This is no longer true. We are part of a much bigger country, and this country is part of a much bigger world. Over the years, improved forms of transportation and technology have broken down barriers between one state and another, or one country and another.
Our government, like most in this world, relies on tax revenues to keep itself afloat. These taxes are not paid by the government, they are paid by the people. If you don’t have the people, you don’t have the tax. This COVID-19 emergency has shown us unequivocally what this means.
We recently wrote about an economic study that showed people, especially the wealthy who pay most of our taxes, have their limits. If taxes were too high, people would pack up and leave, taking money with them that they would otherwise have spent on sales and income taxes.
This is not a possible problem. It is a current problem. As we wrote in a previous article, we are losing people now, and we have been losing people for quite some time. Even the University of Hawaii’s Economic Research Organization recently told our lawmakers that “our models generate significant population flows greater than those we’ve seen, certainly in my lifetime.”
What does it mean? People who pack their bags and move move somewhere else because that other place looks better to them. We cannot fool ourselves into thinking that the people who were born here or who live here will love our islands so much that they will never leave. Instead, we need to see ourselves as competing with other states or countries. For the people.
Certainly, states are not competing for people simply on economic terms like tax rates. We have a relatively clean and healthy place to live, and it’s worth something. But it is foolish to assume that anyone “lucky enough to live in Hawaii” will be able to pay the price of heaven, especially if that price continues to rise without a corresponding improvement in the quality of service our government provides to its people. residents.
Overall, our lawmakers absolutely need to understand that whether we like it or not, we are competing for people. We need to plan our government functions and services, and how our residents and visitors pay them, with this in mind. The status quo, with our people packing and leaving, tells us that we are losing the competition and that we have to do better to survive.
Tom yamachika is president of the Tax Foundation of Hawaii.