Brian Schatz and Neil Abercrombie (file photo courtesy Sierra Club)

Brian Schatz and Neil Abercrombie file photo courtesy Sierra Club

BY LOWELL L. KALAPA – The newly inaugurated Hawaii state administration begins with a sort of a tabula rasa or clean slate, but whatever steps they take or decisions they make will become a part of their legacy for which they will be remembered.

So it might be beneficial to propose some ideas that might serve as an agenda for those in the driver’s seat for the next four years on how they might improve our community with ideas from improving the business climate to improving education, developing badly needed affordable housing and an efficient government.  Given the current economic doldrums, improving Hawaii’s business climate should be on the top of the agenda.

No one will disagree with the proposal that everything must be done to reduce the cost of living and doing business in Hawaii if Hawaii’s families are to survive this downturn and be able to make ends meet.  Businesses are also on the ropes and if nothing is done to reduce that cost of doing business, it is almost certain that many of those businesses will be forced to close their doors and take with them the jobs that Hawaii’s families need.  Once of the loudest complaints heard from businesses is the ton of paperwork that they must file in order to remain in compliance with numerous Hawaii laws with everything from labor to health to safety to you name it.  Many business owners complain that they spend more time filling out these forms than they do running their business.  Is there a way to streamline this process and perhaps reduce the number of forms which have to be filed every month?

In the area of taxes, consideration must be given to leveling the playing field so that all taxpayers are treated alike by eliminating tax incentives that only benefit a handful of taxpayers.  While the special interest groups argue that those incentives help to diversify Hawaii’s economy, those incentives create lost revenue and unless there is a concurrent reduction in state spending, those lost dollars have to be made up by other taxpayers who cannot avail themselves of those incentives.

For those taxpayers who understand the impact of the general excise tax, they understand the huge impact the tax has on purchases by businesses of goods and services consumed by the business that are essential to keep the doors open.  Consideration should be given to reducing the general excise tax rate on those transactions where the goods and services are for consumption by the purchasing business.  After all, the cost of the tax has to be recovered and it usually is imbedded in the cost of the goods and services eventually sold by that purchasing business.

If Hawaii expects to attract businesses that have highly paid employees, then consideration needs to be given to reducing the maximum individual income tax rates and insure that those rates kick in at truly lofty income levels.  At the bottom end, Hawaii continues to hold the dubious distinction of having one of the lowest thresholds at which the poor must begin paying the state income tax.  An increase in the standard deduction would be the first step in resolving this irony.

Everyone recognizes that Hawaii has some of the highest electric rates in the country, a fact that was exacerbated last year by the imposition of the dollar per barrel “oil tax.”  While the barrel tax is supposed to generate funding for Hawaii’s pursuit of energy independence, this added cost of energy merely increases the cost of doing business and living in Hawaii.

While the general excise tax law generally treats goods or services that are incorporated into the final product that is then sold to the final consumer at the lesser 0.5% rate, fuel purchased for the generation of electricity is taxed at the full 4% (4.5%) rate as if the fuel were being consumed and used by the electric utility.  Consideration should be given to extending the 0.5% rate to such fuel purchases as a means of reducing the cost of electricity in Hawaii.

Unlike the targeted tax credits which have been so popular with some lawmakers in recent years, these suggested changes would benefit all taxpayers and make Hawaii a more attractive place do live and do business.  Lowering the overall burden of taxes, including the in-lieu taxes of fees and regulations, would go a long way toward sharing prosperity and a brighter future for all residents of Hawaii.  That said, then one has to also accept the fact that adding more taxes, fees, and regulations will only darken the prospects of economic growth and expansion.

Next week we will look at some other areas that could use improvement that will benefit the economy.

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