Taxation of Envy

by Tom Yamachika, President, Tax Foundation Hawaii

This week, I wanted to share some inspiration I found in Aloha State Daily columnist Sterling Higa’s “Hawai‘i Millionaire Tax:  Why the New 13% Bracket Won’t Be the Last.”

Countless people and organizations have implored lawmakers to make “the wealthy” pay their “fair share.”  Of course, neither “the wealthy” nor “fair share” are defined.  Only the sentiment is tangible.

Mr. Higa points to the recent enactment of the millionaires’ 13% tax bracket as evidence of the sentiment.  It also appears in “Empty Homes Tax: Oʻahu Voters Blocked from Weighing In,” where Civil Beat seems to be disappointed because the Honolulu Charter Commission failed to advance an empty homes tax proposal to the November ballot despite obvious difficulties in implementation, constitutional issues, and resistance within the City Council.

The Bible warns in the Tenth Commandment, “Thou shalt not covet.”  Envy is identified as one of the Seven Deadly Sins.  “Envy is the one vice that never announces itself,” Higa writes.  “Pride struts and greed hoards, but envy always arrives dressed as justice.  A tax on millionaires feels like fairness.”

He has a bigger house than I, or a better car, or a boat where I don’t.  I can’t do much about it by myself, but government can cut him down to size with the power of taxation.  Taxation, however, is not supposed to be about retribution.  “Taxes are what we pay for civilized society,” wrote Supreme Court Justice Oliver Wendell Holmes.  Government provides services to society and the costs are spread among us.  Government also can collect fines and penalties to punish misconduct, but earning money and being wealthy, in our system of capitalism, are perfectly legal.

The other scary thing about taxation derived from envy is that the target of the envy can and does shift over time.  Higa writes, “Envy is fed like a furnace.  Social media puts every lifestyle on earth in every pocket in Hawaiʻi, heaping the coal into the flames.  Envy becomes a mood — a low, constant awareness that somebody, somewhere, has the kitchen or the vacation or the body you were denied.  A mood cannot be satisfied, but it can be channeled, and it is channeled toward whatever target happens to be within reach.”

It may be a millionaire’s tax today.  Next year, or maybe the year afterward, it could change to a tax on half a million because those people are “wealthy.”  (Or the million won’t be worth as much as it is this year, due to inflation.) The envious may also want to dial up the pain.  Maybe a 13% tax is not sufficient to be a “fair share.”  Would 14%, 15%, or 20% be fairer?  We will certainly see legislative proposals to move either or both levers.

As Higa writes, “Hawaiʻi already carries one of the heaviest state-and-local tax burdens in the country.  The needy are not much better off for it.  The burden of our state shows up in the rent, in the grocery bill, in the exodus of local families headed to Las Vegas.  A man who can imagine no way to feed a widow except by voting to tax his neighbor has not discovered compassion.  He has misplaced his imagination, and it is worth asking where he lost it.”

“Envy had finished its work in Cain long before he lifted his hand.  It hollowed him first.  It always hollows the envier first, depriving him of the blessings he has by making them invisible.”

“The exit is not a cleverer tax or a purer market.  It is contentment — the settled conviction of having received more than one was owed.  It frees a man to look at his neighbor’s good fortune and simply be glad.”

We hope that lawmakers and the rest of us alike can enjoy this freedom.