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Sunday, June 24, 2018
Pray I Don’t Alter It Any Further
By News Release @ 5:00 AM :: 873 Views :: Taxes

Pray I Don’t Alter It Any Further

By Tom Yamachika, President, Tax Foundation Hawaii

A few days ago, I got my annual emailed reminder from the Social Security folks that they prepared an electronic statement for me – they’ve gone green, so they aren’t sending those statements on paper any more. So, for the first time in years, I logged in and looked at it. There, in the middle of the page, were some words that smacked me in the face with reality.

Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at any time. The law governing benefit amounts may change because, by 2034, the payroll taxes collected will be enough to pay only about 77 percent of scheduled benefits.

For all these years, I thought I was paying money into an insurance system – after all, the official name for Social Security is Old Age, Survivors, and Disability Insurance or OASDI – which I thought gave me some vested benefit. The reality is that it isn’t insurance at all. OASDI is a tax, the government got my money and keeps getting my money, and although they promised to give me benefits they didn’t promise that those benefits would never change. Remember Darth Vader’s line in “The Empire Strikes Back”? “I am altering the deal. Pray I don’t alter it any further.”

I am not, of course, accusing anyone or any group of malice or even mismanagement. But we need to realize that when government makes promises, sometimes those promises change.

I am reminded that when our Transient Accommodations Tax (TAT) was adopted in 1986, vocal and strident opposition from the Neighbor Islands and from the tourist industry was quelled by promises that the TAT would only be needed to fund the convention center, which would benefit all islands, and then the tax would go away once the center was built and paid for. Well, the center was built and paid for, but the TAT is still with us, not on a temporary but on a permanent basis, at more than double the tax rate it was when first enacted. Moreover, a controversial “resort fee” bill now threatens to expand its scope to reach everything that a hotel charges a tourist. The deal has been altered, several times in fact, and we pray that it not be altered further.

Plans and promises can also be revisited even if they are kept initially. After the Great Recession of 2008, our lawmakers pleaded with the electorate for their understanding when they enacted a “temporary” income tax hike on individuals, with new 9%, 10%, and 11% tax brackets, “just to get us through the recession.” The new brackets did indeed expire at the end of 2015. But lawmakers reinstated them in the 2017 session, effective at the beginning of 2018, to improve or expand tax credits to assist with poverty relief. The deal has been altered and we pray that it not be altered further.

This year is an election year. We can go to the polls later this year and do our part to see that those elected to office can be trusted to keep their promises, or that appropriate consequences befall those who can’t. If we don’t do our part, the only thing we can do when we are affected by a tax deal that has been altered is to pray that the deal not be altered further.

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