Contradictions are fascinating. They cut to the core of what is wrong with thinking processes. Taxation in Hawaii is a case in point.

Right now there is much consternation in the public arena because of the expiring of the General Excise Tax (GET) exemption on “gasohol” which in this case is gasoline blended with ethanol at a ratio of 90 percent to 10 percent respectively. The price of gasohol went up 11 cents per gallon on January 1, 2007 because the exemption expired. Consumers are outraged. Newspaper editorials are calling for an extension of the exemption.

Why? Isn’t the point to get people to drive less, to get people out of their cars? There are some who advocate raising the tax on gasoline to European levels (although this doesn’t get Europeans out of their cars either) in order to induce more of the public to use public transit. How is it that the expiration of the GET is unfair to consumers but an increase in the GET itself isn’t?

A 12 1/2 increase in the GET was advocated, and passed, to build a mass transit system to provide a means to get people out of their cars. So in this case a tax increase is good even though the rail won’t be completed for many years. But a tax increase on the gasohol that automobiles need to function is bad because it hurts the average consumer. Either tax increases are good or they are bad, can’t have it both ways.

The increase of the conveyance tax passed in 2005 was good because it was needed to provide funding for Legacy Lands and affordable housing projects. But the tax surplus last year was bad because the public had overpaid its taxes and tax cuts were called for.  Yet, for the most part, that surplus was used subsequently for more spending, not tax reductions or rebates.

There is a growing hue and cry about how the housing boom has increased private property tax assessments and “something must be done.” Yet there are already rumblings that property tax increases in the future might be needed to pay for rail public transit, or perhaps another increase in the GET will do the trick. The city administration is reportedly considering business property tax increases with property tax breaks for resident owners. But renters are crying foul at this latter proposal since their rents would likely rise, not being resident owners.

It is a strange and absurd thing when one increase in taxes is good because it adds to the state or city coffers and but another is bad because it is harmful to some group of people. The truth is that the vast majority of taxes exist simply to manipulate the people. That is why their application is so contradictory. All tax increases are harmful to some degree but it just very difficult to figure out where the economic damage is.

The calls for an extension in the exemption of the GET on gasohol may or may not be heeded. The odds are probably not. Once politicians have a revenue source they are loathe to give it up, especially when they have a captive audience like the people of Hawaii.

The whole tax arena has become a maze of taxes revenues taken from some to benefit yet others. If you want to know who is the support behind any particular tax look to see who will ultimately benefit, although this is not always readily apparent.

Yet, in the final analysis, nationally as well as locally, the whole tax system has become a vast shell game that takes from some to benefit others. Aside from a small number of crucial core services that almost accidentally get implemented this is generally true.

Something definitely needs to be done but the question is how to do it. Every time it appears gains are made in some areas there are losses in others.  Yet it isn’t possible to simply give up, just become aware of the contradictions, see through them and try to point them out to others.

Don Newman, senior policy analyst for the Grassroot Institute of Hawaii can be reached at: mailto:don@grassrootinstitute.org