ZENITH REACHED IN EARMARKING OF UNRELATED FUND SOURCES

by Lowell L. Kalapa, Tax Foundation of Hawaii

One of the reasons why there is growing taxpayer cynicism about the work of lawmakers is the earmarking of revenues for specific programs which in many respects has little relationship to the source of the funding or are certain to shrink in direct proportion to the need for the funding.

What, might you say, do you mean? Take, for example, that a portion of the cigarette tax goes for the funding of the cancer research center and community health centers. On one hand, advocates of smoking cessation argue that higher and higher cigarette taxes will make it more and more expensive to smoke and it will discourage current smokers from continuing to smoke as well as youth from ever starting to smoke. Advocates argue that smokers increase the cost of health care to society so they should be asked to pay for the increased costs.

However, where this argument begins to fall apart is when one realizes that if the higher taxes and, therefore, the higher cost of the product actually does discourage folks from smoking, then there should be a decline in consumption. Certainly the decline will become more acute as the cigarette tax is pushed even higher and current smokers either quit smoking or die from diseases caused by smoking. Should that happen, collections from the tax will also begin to decline and those community centers and the cancer research center will see a decline in funding for their purposes.

Should that happen, what then will lawmakers do to replace the lost funding for the community centers and the cancer research center? Will lawmakers tell clients and workers in the cancer research center and the community centers, “Too bad, so sad, but there is not enough funding and we have to lay you off.” Of course not, they will go into other pots for loose change to keep the centers open. If there isn’t any loose change lying around, it will give lawmakers just one more justification to raise taxes.

Another example of why taxpayers continue to grow cynical about lawmakers is the dollar tax per barrel of petroleum products imported into the state. Initially the tax started out as a nickel per barrel the purpose of which was to create a $7 million emergency fund to clean up any potential spill of petroleum products and should a spill occur, there would be money immediately available to clean up such a damaging spill. When that $7 million cap was reached, the nickel per barrel would stop and be collected again only when the balance fell below that amount. Ah, but the administrators of the fund got greedy and decided to use the proceeds for all sorts of things including trips to get “training,” filing cabinets, and other office equipment. After all, they argued, they had to know how to deal with such spills.

And if that wasn’t enough, advocates decided to expand the uses of the fund to include violations of the clean water act and non-point source pollution of surface waters. This included any kind of pollutants beside those from petroleum products. At the same time, the cap was removed so that the tax could be collected on a permanent basis. Thus, the fund became more than just an emergency reserve fund, but a part of funding regular government operations.

More recently lawmakers looked to the “barrel tax” as the source to fund energy independence and food security. Citing the need for petroleum dependent Hawaii to get off fossil fuels and to insure that Hawaii residents would have a sustainable food supply that was clean and safe to eat, lawmakers slapped another dollar on all barrels of petroleum products imported into the state.

The problem was that while those who pushed for the additional dollar per barrel claimed that this was akin to “motherhood and apple pie” for the energy independence and security of the food we eat, lawmakers immediately redirected 60 cents of every dollar into the state general fund to underwrite shortfalls in the education, social services, health and public safety budgets. So much for energy independence and food security!

When one stops to think about it, what does a barrel of petroleum products have to do with a slug crawling over a lettuce leaf in Puna? So much for food security! Again, so much for the relevancy between the source of the revenue and the program it is to fund.

Finally, this session the push is on to levy a tax on single-use bags where retailers would prefer to slap that charge on their customers in order to change customers’ habits. But where does the money go - not to the recycling program but to the environmental response fund and to the department of land and natural resources. Again, nothing more than a money grab for a bigger government that taxpayers cannot afford.

- 30 -