POSTED: 01:30 a.m. HST, Apr 07, 2011
State senators want to know which option the public would prefer: raising the general excise tax by an amount yet to be set or suspending for the next few years, possibly longer, a tax exemption granted to some businesses for particular transactions.
Thanks for asking, senators. But the question is sort of like a would-be assailant posing a choice of whether you’d want to get swatted by the left hand or the right hand. Either way, it’s going to hurt your pocketbook.
Under the first scenario, the extra cost will be more obvious because it will show up on the receipt when you buy a $2.89 can of tuna for three, maybe four sandwiches, depending on how much mayo gets mixed in. It will be evident when rubber fatigue finally separates the strap on your 3-year-old pair of slippers, requiring purchase of a new pair.
A stay of the business exemptions — which go to mostly to contractors, but also to shipping companies like Alexander & Baldwin’s Matson subsidiary, Hawaiian Airlines, petroleum refiners and hotel property owners — would cost such enterprises millions of dollars.
On the surface, this would appear to be the better choice; better big businesses take the hit instead of the individual consumer.
However, as all akamai Hawaii people know, trickle-down economics dictates that end users, meaning you and me, will see prices and charges creep up for refurbished lanais, airline tickets to Lihue and for that can of tuna shipped from Long Beach, Calif., to Honolulu Harbor. Garans.
Legislators have already heard from businesses. Their lobbyists have been camped at the state Capitol trying to convince lawmakers that cutting off the exemptions, which would generate as much as $276 million in 2015, will hurt economic recovery, slow growth and even cost the state — gasp! — jobs.
All of this is likely true, but a raise of the excise tax would have the same effect, even with increases in standard deductions and various tax credits for low-income people. It would simply spread the pain more evenly and, as a University of Hawaii economist points out, would be more equitable.
So why are senators putting up the question? My guess is that they realize a tax increase or exemption or both will be necessary to span the state’s huge budget gap of $1.2 billion. While they may genuinely want to gauge public sentiment, the effort gives them a measure of cover.
Whatever the case, lawmakers and Gov. Neil Abercrombie will have to decide. They began the process yesterday and will have through the end of the month to reach resolution. That’s what they are elected to do. It ain’t easy being lean and mean.
Cynthia Oi can be reached at email@example.com.