It's a perfect time to cut taxes
by Keli'i Akina, Ph.D., President / CEO, Grassroot Institute of Hawaii
Thanksgiving is at our doorstep and Christmas is just around the corner, but everything is not joyful.
Considering Hawaii’s high cost of living and the nation’s record inflation, many Hawaii families are taking a hard look at their finances and calculating how inflation and recession will affect their holiday plans, if not their entire economic futures.
But there is some good news: Hawaii has a state budget surplus of about $2 billion, and that is expected to grow to about $10 billion over the next four years. It also has $800 million in its emergency reserve, or “rainy day” fund.
All of which is to say: It’s a perfect time for our returning and newly elected state legislators to cut taxes and remove barriers to economic growth as a way to lower the state’s back-breaking cost of living.
One good place to start would be to exempt medical services from the state general excise tax. Not only would it help lower our healthcare costs, it also would help address the shortage of medical professionals in our state.
If you haven’t done so already, I encourage you to sign and share the Grassroot Institute of Hawaii’s petition asking for just such an exemption, which you can find here.
And yes, a GET exemption for medical services would reduce state tax revenues by about $200 million a year. But considering the size of the state’s budget surplus, lawmakers could cut taxes even more and still come out ahead.
Another idea would be to lower the GET rate in general. Reducing its rate by just 1 percentage point — from 4% to 3% — would put $1 billion dollars back into the economy and have the bonus effect of benefiting low-income earners who spend a higher proportion of their income on the tax.
Our lawmakers could also slash our income tax rates, which are the second highest in the nation. And if they want to help the tourism industry, they could reduce the transient accommodation tax, which originally was supposed to be only temporary anyway, leaving tourists with more money to spend in the private sector.
The point is, there are plenty of ways our legislators could put money back into the pockets of Hawaii taxpayers. All that is needed is a little creative thinking — and empathy for Hawaii’s struggling families.
Ironically, we learned just this week that the state went to the bond market to borrow $800 million — which, oddly enough, is the same amount as in the rainy day fund.
We could ask why the state needs more taxes, fees or bond debt, especially when it has such a comfortable budget surplus. But whatever the reason, it’s still a perfect time to cut taxes, trim costly regulations, reduce barriers to housing and, in general, work more seriously to lower Hawaii’s exorbitant cost of living.
A state legislative resolution urging Congress to reform the Jones Act, which adds to Hawaii’s shipping costs, also would be nice.
In any case, we can all see that Hawaii residents are having a rough time as it is, and the future is worrisome.
Lawmakers can do their part to help turn this around, keeping in mind the good news: the state budget surplus.
What a wonderful holiday gift it would be if our state legislators let it be known that reducing Hawaii’s high cost of living is to be their primary focus in the coming new year.
E hana kākou! (Let’s work together!)