Higher Taxes Hurting Hawaii

by Pearl Hahn

It has not been an easy year. Everyone has been touched in some way by the economic recession, but everyone also disagreed on how it would be best addressed. State workers battled Governor Lingle over furloughs, and labor unions wrangled over pay cuts. In an effort to shrink the state deficit, the Legislature passed several tax increases that are hurting everyone and helping no one.

This past session, legislators voted to increase the state income tax, the transient accommodations tax, the conveyance tax on sales of luxury and second homes, and taxes on tobacco products. It has not taken long for these tax raises to take effect. In July, Hawaii had nine mass layoffs, up from five mass layoffs in June. Major health insurers in the state reported back-to-back quarterly losses and dipping membership. It was reported on Friday that hotel occupancy hit a new record low.

Now, statewide participation in the food stamp program grew by 25 percent, or by over 23,000 residents, over a nine-month period ending in June. One in eleven residents are getting food stamps.

In passing the tax increases, some legislators defended their decision by saying the taxes would only affect the rich. This is, of course, a fallacy- clearly, the poor are being hit the hardest.

The legislature was short-sighted enough to pass several taxes on goods that quickly consume the limited disposable wealth of the poor. Now we are seeing higher enrollment in food stamp and likely other similar programs.

By raising taxes, the state government has removed a significant amount of disposable wealth from people who are forced to choose among an increasingly limited range of competing services. Diversity, choice, innovation, and cost-efficacy are being erased from the market. Without drastic measures, it will be nearly impossible for Hawaii to compete with others as a viable economy.

We are losing twice over with poor services and shrinking spending power. There is no better time to insist from our lawmakers that they stop confiscating our wealth and restore the availability and range of services we need.

Pearl can be reached at pearl@grassrootinstitute.org

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