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Sunday, January 01, 2012
Barrel Tax: When Can Taxpayers Believe What They Hear?
By Lowell L Kalapa @ 5:02 AM :: 4339 Views :: Energy, Environment

by Lowell L. Kalapa, Tax Foundation of Hawaii

Here we go again! While it is expected that lawmakers might make another attempt to raise taxes to fill a hole in the state biennial budget because of their haste last year, most people did not expect that others would even consider approaching the legislature to raise taxes.

Yet another task force has come forward to recommend that lawmakers raise the “barrel tax” on all imported petroleum products by another dollar per barrel. As readers will recall, lawmakers upped the “barrel tax” a few years ago on the rationale that Hawaii needed to become energy independent and that a tax on all petroleum products would help to raise the money to move Hawaii toward a “greener” future by acquiring green technology.

As that proposal began to gain traction, advocates of the tax increase added all sorts of funding for the county economic development councils, food safety and other alternate energy programs. The support became so frenzied that advocates questioned critics as not committed to energy independence. How could one argue against such motherhood and apple pie logic except for the fact that the tax would affect those who could least afford yet another tax eating into their subsistence budgets.

Not only did lawmakers buy into those arguments but when the former governor vetoed the measure, they over rode her veto knowing very well that most of the tax increase was destined to help bail out the state general fund. In fact, 60 cents of the dollar increase was earmarked for the state general fund and not for the purpose of moving Hawaii off fossil fuel dependence.

Now the Hawaii Economic Development Task Force is poised to once more feed at the proverbial trough, and taxpayers need to be on guard as the Task Force proposes to increase the “barrel tax” yet again. Given that lawmakers did not use the first increase in the “barrel tax” for the purpose of energy independence, is the Tax Force condoning the use of that first dollar increase for general fund programs? Obviously legislators looked upon the first increase as just an opportunity to raise taxes on all taxpayers.

If the Task Force and the administration believe that energy independence and food safety is of such high priority, then they should ask the legislature to utilize the original dollar increase in the “barrel tax” for the purposes it was originally intended. Those lawmakers who advocated for the first dollar increase should be ashamed that they misled their constituents into believing the first increase was to be used for energy independence.

Taxpayers should view this new effort with skepticism, if not outright indignation, as Task Force members and administration officials believe that taxpayers can be taken to the cleaners again. Officials should realize that taxpayers were asked for a tax increase for energy independence and instead the money was used to supplement the state budget. So how can taxpayers believe officials and lawmakers again this time?

Obviously state officials, at both the administrative and legislative levels, are not able to set priorities for the taxpayer dollar. Instead, they have resorted to smoke and mirrors to make the public believe that they are spending taxpayer dollars wisely and that they have been willing to tighten their budget belts during a weak economy where taxpayers are struggling to survive. By not being able to set priorities, the message they send to taxpayers is one of merely needing more money to fund all programs.

Taxpayers, as well lawmakers, need to recognize that the “barrel tax” is insidious, adding to the cost of everything in Hawaii, yet remaining hidden from the average taxpayer as the cost of the tax is embedded in the price or cost of the goods and services taxpayers purchase. The cost of the tax tends to multiply, or pyramid, as many of the goods and services affected by the increase in the “barrel tax” are purchased or used by businesses who then must past the cost of the increased goods and services they consume on to their customers. Take an obvious example, as the cost of fuel rises because of the increase in the “barrel tax” the cost of delivering the goods or services to be purchased by customers will have to be absorbed and then be passed on to the final consumer. Thus, an increase in the “barrel tax” is about as bad, if not worse, than an across-the-board increase in the general excise tax rate or personal income tax rates because the increase in the rate is hidden. Hopefully, taxpayers will remember this charade when they go to the ballot box this year.

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Related: Can Abercrombie Administration impose Billions in Carbon Fees without Legislative Vote?

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