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Sunday, February 3, 2013
Jacking Up the Heat in Tax and Fee Hell
By Lowell L Kalapa @ 5:05 AM :: 5247 Views :: Taxes

Jacking Up the Heat in Tax and Fee Hell

by Lowell L. Kalapa, Tax Foundation of Hawaii

People inquiring about what the legislature is doing are surprised when told that lawmakers are hard at work trying to find ways to take even more of their money. Of course, it starts at the top with the state administration which has already come forward with a number of proposals that will do nothing more than make it even more difficult to survive in Hawaii.

Note well that although no one is whispering about tax increases, there are a number of proposals that would do just that, but again, this time those proposals are disguised as fees or swathed in motherhood and apple pie issues such as the restoration of the watershed or the fight against childhood obesity. Regardless of the purpose, taxpayers must ask the hard question which obviously lawmakers refuse to ask and that is, if these issues are of such high priority, why aren’t they using the taxes that I am already paying to state government? In other words, are lawmakers actually doing the job we ask them to do - that is setting priorities for the precious dollars we give them in tax revenues?

Instead, it appears that elected officials don’t want to upset any constituent in cutting out programs and services to free up funds to pay for new programs and services which all of a sudden have become critical needs. Instead, they have resorted to finding ways to raise new sources of funding and dedicating those sources for a specific purpose, another downfall of recent legislatures.

Taxpayers should be aware that the state administration has already put on the table a laundry list of tax and fee increases that could exceed $70 million annually. This is hypocritical in light of the fact that the administration just indicated that the economy is improving to the point that it can restore public employee pay cuts, replenish the rainy day fund and the hurricane relief fund, and begin to pay down some of the state’s unfunded liabilities for public employee pensions and health care funds.

So if the state has all this money, why then do the administration’s legislative proposals have a plethora of proposals to raise additional funds? For example, the department of land and natural resources proposes to raise the conveyance tax rate on properties whose value exceeds $2 million. The department estimates that this increase in the conveyance tax will raise more than $10 million annually. However, if that proposal doesn’t survive the legislature maze, the health department is proposing that a ten-cent fee be charged for every single-use shopping bag. If that proposal is adopted, the department estimates that it could generate up to $15 million annually.

The counties have already moved to ban plastic shopping bags that would be the target of this fee. Further, one has to question what the use of plastic bags and the state’s watershed have to do with each other if, in fact, no one will be able to hand out those plastic bags in the near future? At that point, the fee is no longer a fee as there is no connection between the bag use and the watershed of the state.

Then there is the proposal that would impose a penny per ounce on sugary beverages submitted by the department of health. It is purported that the new fee will increase the price of the beverage and become a financial disincentive to consume these beverages. The funds generated from this fee would be used to combat “childhood obesity” which, no doubt, is a growing problem. However, is the consumption of sugary beverages the one and only contributor to childhood obesity?

Didn’t the First Lady, Michelle Obama, hit the nail on the head when she exhorted kids to get up and get moving. Indeed a major contributor to childhood obesity is the fact that kids today are sedentary, preferring to sit in a corner with their Ipads and text their friends rather than chase a ball in left field. No, the tax on sugary drinks is nothing more than a grab for money based on the excuse that the higher price of sugary drinks will deter consumption that, in turn, will help the childhood obesity problem.

The problem is much more complex, but adopting the tax allows lawmakers to show that they did something. But in the end, childhood obesity will continue to be a problem because sugary drinks are but a small component of the factors which indeed do cause obesity.

What we do know is that all of these fee and taxes will turn up the heat in tax hell by more than $65 million if they are adopted.

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