Help people save by cutting their taxes

The Hawaii Legislature appears to be dropping hints about the way people save their money — or don’t save it, as the case may be.

While much of the news coming from this year’s legislative session has revolved around a possible minimum-wage hike and increase in the state general excise tax, there’s another trend quietly moving through the Legislature, one that speaks volumes about the philosophy of our current policymakers.

Multiple bills heard this session have revolved around encouraging residents to save. The details vary, but there’s a common theme: The state wants to be your local bank.

The ALOHA homes initiative, for example, hopes to have low-income residents save up and buy leasehold properties from the state. Other bills would:

  • Create an “individual housing accounts” savings program (SB1310);

  • Establish a “Hawaii retirement savings” program for the private sector (SB1374);

  • Set up a state mortgage insurance program to guarantee up to 15 percent of the principal balance of real property mortgage loans, under certain conditions (SB718);

  • Expand eligibility for a state-funded individual development account so that everyone up to the median income could get help buying or renting a house, paying for public transportation, buying or repairing a car, going to school or starting a small business (SB1081/HB334).

The point isn’t whether these bills pursue worthy goals or might help someone. It’s whether these kinds of programs are really the proper role of government. In other words, to whom would you rather trust your financial future: experienced professionals whose livelihoods depend upon continued good performance, or unelected bureaucrats with nothing at stake?

The fact is, nearly every proposal I mentioned attempts to copy something already available through the private sector. Mortgage insurance, savings programs, individual retirement accounts — they are all available through long-existing private financial institutions, including credit unions.

In testimony on SB1374, a representative of the banking industry wondered whether the state was planning to intrude on the private sector and take advantage of its unique position to undercut private entities.

“It is not the role of the state to engage in competitive activity with the private sector,” said Neal K. Okabayashi, executive director of the Hawaii Bankers Association.”

For Hawaii taxpayers, there is another question: Where would the money come from? Even programs to which the state might not have to contribute funding would still need bureaucracies to manage and administer them — and lobby for bigger budgets in the years ahead.

Such proposals suggest that our legislators don’t really understand Hawaii’s housing crisis and high cost of living. They seem to believe Hawaii residents just don’t know how to save, and need the government’s help to do so. But that ignores the reality of living in Hawaii.

Just take a look at the Grassroot Institute of Hawaii’sWhy We Left Hawaiiseries. You’ll see story after story that shows residents are having trouble saving not because they are financially inept but because they are faced with an economic reality that makes savings and home ownership virtually impossible.

You can’t help people save money by growing the government. All that will do is increase bloat and raise spending … which will require more tax revenue … which will lead to higher taxes … which will increase the cost of living.

Hawaii’s policymakers should get out of the finance game and leave it to the experts. If they want to help residents save more, they should start by lowering our taxes, including a grocery exemption to the general excise tax.

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