Tom Yamachika was as surprised as anyone when Lowell Kalapa, the widely known, respected and liked president of the Tax Foundation of Hawaii, died in December at age 64.

"Obviously, when he passed away very suddenly it was a huge blow to all of us, and a huge shock," said Yamachika, a tax attorney in private practice who subsequently stepped up to the plate and is now the foundation’s interim president.

Yamachika was a board member of the foundation at the time of Kalapa’s death. He was asked to serve as interim president by its chairman, Michael O’Malley, who also is a partner in the law firm Goodsill Anderson Quinn & Stifel.

Kalapa had been president of the foundation since 1979. He was seemingly tireless in speaking on behalf of Hawaii taxpayers before various state legislative committees and City Council hearings, offering the views of the nonpartisan research and educational group on prospective legislation affecting taxes.

That role is being carried on, for now at least, by Yamachika, assisted by two other employees of the foundation, which is funded by 200 or so individual and business members. He said it’s been fun but challenging, since he’s had to juggle his duties at the foundation with his continuing law practice.

"It’s been kind of like working two jobs,"he said last week. "I’m here (at the foundation) in the daytime doing this, and I kind of deal with my law practice sometimes in patches during the day and some nights and weekends. But so far it’s OK. I haven’t lost a whole lot of sleep over it. Maybe on occasion."

Yamachika, 55, graduated from Farrington High School before going on to earn a bachelor’s degree in engineering and applied science at Yale College, then a law degree from the University of California at Berkeley. He is a tax committee affiliate member of the Hawaii Society of Certified Public Accountants, a member of the Japanese Chamber of Commerce and a past board treasurer of Goodwill Industries of Hawaii.

He resides in Aina Haina with his wife and their three dogs.

Question: A lot of people have been wondering who could ever take the place of (former Tax Foundation of Hawaii president) Lowell Kalapa. Could that be you?

Answer: Well, I don’t think there will be ever a replacement for Lowell Kalapa. He certainly had a great reputation, and everybody’s been telling me he left such large shoes to fill, and I do believe that.

Q: Is there a search on for a permanent president — or is that person going to be you at some point?

A: I don’t know. The board has been meeting. They kind of need to figure out what direction they want to take the organization in. Obviously Lowell had his ideas, and now that he’s not here anymore, the organization is kind of doing some soul-searching and meeting to find out what niche they want to fill in our society here. Then they need to figure out what kind of person they want to lead the organization.

Q: Because the foundation is so consistent about opposing tax credits and micromanaging the economy through the tax system, does that make it difficult for you to appeal to some businesses or foundations because that conflicts with their special interests?

A: A lot of times what we stand for is not so much the fact that a certain business or certain industry needs relief. The thing we’re more concerned about is how that happens. Because you can have good tax credits, if they’re well done, if they’re tightly drafted, if they’re well executed, if they’re designed to ease off after a while, and thereby wean the industry from constant subsidy. But if you don’t do that, then what happens is you get this blank check being written on the state treasury. And it keeps going for a while, and then … if the expiration date comes up, then everybody from the industry comes and says “Please! Please extend!” Then, after two or three times, finally the Legislature gets fed up and says, OK, we’re not extending it any more.

Q: So, in theory, most of your business members understand what the foundation is really trying to do?

A: I think most of them do. What we try to emphasize is that we have certain core principles that we’re trying to stand up for, like transparency, equality, that kind of thing.

Q: What would you say are some of the hallmarks of an ideal tax system?

A: Simplicity, transparency, neutrality, stability, no retroactivity, broad bases and low rates. People talk about the general excise tax a lot. It’s actually kind of efficient in that if affects everything but produces so much revenue with a relatively low nominal rate.

Q: But that’s just nominal because that doesn’t count the pyramiding, right?

A: That’s right.

Q: And so, since you brought that up, what do you think about this proposal of Gov. Neil Abercrombie’s — which, in the past it was guys like Fred Hemmings who brought this up — you know, food credit off the GET, in this case for seniors; is that the current proposal?

A: Gov. Abercrombie had actually introduced several bills giving various kinds of poverty relief to fixed-income seniors. We have no beef about giving poverty relief in general. We just don’t think it’s efficient to do it through the tax system.

Let me put it to you this way. When you look at our income tax, it kicks in at about $3,000 annual income. The federal poverty line is about $13,000 for a single person, OK? So by the time you get to $13,000, in Hawaii you’re already in the fourth bracket, at 6.4 percent. This is because, I think, the lower end of the bracket hasn’t been adjusted since the ’60s, 1965 or so. So the question really becomes, do we really want to tax people deeper into poverty? 

Q: You’re proposing taking people off the tax rolls, up to a certain point?

A: Yeah, exactly. When you create new credits, you gotta create the forms, and you gotta create the computer system that can read the forms, and you need to create the enforcement system to go around that, because the way our tax credit system works — and this pretty much applies to all credits that we offer except maybe one or two — you need to claim your credits within a year or you lose them. So, if people aren’t aware of the credits or don’t claim them, then they lose them and can be assessed.

So we have costs to do that, and to be fair, we need to have costs for public outreach when we enact something new. It’s just more fair to the general populace to say that since we’ve enacted a new tax credit, we need to tell the public what it is and how to take advantage of it. But all that costs money. And, you know, rather then spending the half-million or million dollars it’s going to take to do all the administrative stuff, why don’t you just apply it to tax relief? Why don’t you just take people off the rolls, because for people who are earning that little, why do you want the tax system to deal with them anyway? That’s my pitch.

Q: Going back to GET then, what — keep it the way it is? Isn’t it regressive? That’s something Lowell always talked about.

A: Of course it’s regressive, but what you need to do is consider it in the context of an overall system. The progressivity is put in by net income tax. 

Q: Oh really?

A: Yeah, because the net income tax is designed to kind of measure people’s ability to pay, then ratchet up the bite when people can pay more. That’s what income tax systems around the country do. Ours is no exception. And a piece of our overall system puts the progressivity in.

Q: So the progressivity of the income tax offsets the regressiveness of the GET?

A: Yeah. And on the political side, people like the GET for a number of other reasons, one being a large portion of it is exported. You know, tourists buy stuff. They rent hotel rooms; they buy goods and services. The GET applies to all that. 

Q: A sales tax would apply to all that, too. Wouldn’t that be better?

A: No. A sales tax typically applies only to tangible personal property. In most sales-tax states, you have that distinction so that it doesn’t apply to services. So like in Hawaii, for example, what do you do about tours? We tax them.

Q: What are some of the most pressing tax issues at the state Legislature this year, from the foundation’s point of view?

A: Well, just to kind of summarize what’s going on at the Legislature, obviously it’s an election year; so there’s not much discussion about revenue enhancement, with a couple of exceptions. But there’s a lot of discussion about tax relief of some kind. All kinds of credits are being proposed, and a lot of that is still alive.

For poverty relief, a lot of the agencies that help the low-income population are pressing for enhancement of the renters credit and the food excise, and they wanna see the state adopt some portion of the federal EITC (earned income tax credit).

Q: What’s your position on that one? Or on any of these things?

A: For poverty relief, what I’ve been up there telling them is that we really should be thinking about is taking these people off the tax rolls, so the tax system doesn’t have to deal with them. Then delivering relief through your human services agencies — that’s what they’re there for. The counter arguments to that are that the human services agencies don’t reach everybody. But everybody still has to file tax returns, because the threshold is so low.

Q: What about legislation that involves taxes implicitly but not directly, like the Jones Act, or other regulations that basically increase the cost to the consumer?

A: Well, that type of thing we don’t really get into usually because it’s kind of more regulatory. We have enough to deal with just the taxes.

Q: Is there one overarching bill that you’d like to see passed this year, or killed? Something really good or really bad that we ought to know about?

A: Not really. I mean, there’s a lot of stuff that’s really interesting. I had earlier said there weren’t a whole lot of revenue enhancers out there. One of them that is out there is that the counties are trying to impose a 1 percentage point surcharge on the GET. You know, like how Honolulu has the (temporary) half percent for rail. … But now Mayor Kirk Caldwell says, OK, let’s make it permanent. And the other mayors came before the Legislature in the earlier part of the session and they said, well, one of our big priorities is to get a more stable funding source — you know, for this and that. So that danger is lurking in the wings.

Q: What do you think will happen?

A: From what I’ve seen so far, they’ve made a pitch before the money committees, but it looks to me from the hearings, (House Finance Chairwoman) Sylvia (Luke) doesn’t seem to be convinced that it’s a good idea. I’m not sure about (Senate Ways and Means Chairman) David (Ige), but that remains to be seen.

Q: What about special funds? That was another thing that Lowell used to rail against. Are you still harping on that issue?

A: Oh yeah. There are a lot of bills that would create special funds. There are a lot of bills that would create taxes or fees and add special funds to receive the taxes or fees. There are bills that would take existing taxes and earmark them for special funds. One of the ones that’s really being beat up on now is the conveyance tax, because it goes to four or five special funds already and people want to add a few more.

Q: And your argument against that is what?

A: We need to enhance transparency. Let me tell you how special funds work, if you don’t already know. Special funds are little pots of money, and they are there for a specific purpose, so they can only fund specific things, but there really is no legislative oversight as to how that happens. So agencies love them, because they have their little positions, their little offices, and there’s a special fund that funds these offices, so they don’t have to go to the Legislature every year and plead for money for them because the special funds take care of them. But our position has always been that the agencies should be going up there (to the Legislature). They should be justifying what they do. They should be accountable to the legislators and the taxpayers as to how their money’s being spent. I mean, it’s not a bother; it’s an essential function of government.