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    Learning More About the General Excise Tax

    0

    With the legislative session right around the corner, it might be worthwhile to review some basics about Hawaii’s tax system to help lawmakers avoid making mistakes.

    Most of the misunderstandings about Hawaii’s tax system occur in the area of the general excise tax largely because people think of it as a “sales tax” commonly found on the mainland.

    However, unlike the retail sales tax found on the mainland, it is the responsibility of the business making the sale to pay the general excise tax as compared to the retail sales tax, which is the onus of the purchaser to pay that tax.

    This misconception probably occurs because consumers see the 4 percent or sometimes the 4.166 percent shown out separately on the receipt when they make a purchase.

    Sure it looks like the business is collecting the tax from the customer and therefore it must be the same thing as a sales tax. The difference lies in the complaints often made by customers that the business is charging more than the supposed 4 percent.

    Indeed, the statutory rate is set at 4 percent on all retail sales, but the 4 percent rate is applied to all of the gross income received by the business. So for many years, businesses collected what seemed to be the extra amount people called the sales tax, but when it came time to pay the tax collector, the business had to pay 4 percent on everything he or she took in, including the amount shown out separately as the 4 percent tax.

    So instead of just handing over the 4 cents collected on the sale of an item that cost a dollar, the business has to pay 4 percent on $1.04. That’s why businesses started passing along the extra 0.166 percent. While that amount may sound trivial, on a million dollars of gross income that amounts to $1,600 on the $40,000 collected as the general excise tax.

    So unlike the retail sales tax, which is merely collected by the business from the customer, the general excise tax is really on the seller or business making the sale.

    This misunderstanding often leads lawmakers or their staff into introducing measures to exempt the state or county governments from the general excise tax, thinking that this would be one way to reduce the cost of government. These bills usually are right up there vying for the dumbest bills of the session. The drafters obviously don’t realize that neither the state nor the counties are subject to the general excise tax. It is the vendors from whom the state or counties purchase goods or services that are subject to the 4 percent tax. Someone did get it right last session and proposed exempting businesses selling to the state and counties. While technically correct, what the sponsor of the bill missed in introducing the bill is that not only would the state and counties save on the cost of the tax, but more importantly, the state would have to go without those revenues.

    And from an equity point of view, only vendors who sold goods and services to the state would enjoy the exemption. Their competitors selling the same goods and services would have to continue to pay the 4 percent tax.

    In fact, blanket exemptions for certain types of services or goods puts other businesses at a disadvantage and increases the pressure to raise tax rates to make up the lost revenue.

    For example, a popular proposal calls for an exemption for food from the tax base because we all have to eat. That exemption would favor people who sell food while vendors of say, clothes or shoes, would have to continue to pay the tax. And if the demand for revenues to run state government is not alleviated, then the tax rate on those other businesses may have to go up.

    Similarly, there have been proposals to exempt medical services from the 4 percent tax because “people should not be taxed just because they are sick or injured.” That proposal ignores the fact that medical services also are provided to people who are well, as a matter of prevention. It also ignores the scenario of continuing to tax the auto mechanic who is working on the Porsche of the doctor who would be exempt from the excise tax under the proposal.

    Fundamental to the understanding of the state’s general excise tax is the fact that the tax is imposed on the gross income of the person or business making the sale of goods or services. It is imposed on everyone who sells goods or services in the state when these goods or services are provided by other persons in the state.

    This latter point is where there is a misunderstanding of goods sold by non-profits that are also sold by local businesses. This is because the sale of that sausage or sweetbread is in direct competition with the business who has to pay the 4 percent tax on that same sausage or sweetbread.

    More next week on Hawaii’s unique tax system.

    ”’Lowell L. Kalapa is the president of the Tax Foundation of Hawaii, a private, non-profit educational organization. For more information, please call 536-4587 or log on to”’ https://www.tfhawaii.org

    Responding to Those Who Oppose the War

    Al-Qaeda stated after 9/11 that their goal is to “bring down western civilization and create a global Islamic empire.” They want nothing more, nothing less. U.S. foreign policy is inconsequential when considering the bigger picture. The war is not about our supporting Israel or having military in the Middle East or even oil. It’s about religion and it’s growing.

    There is an easy way to stop the war: everyone in America and the rest of the world must take up the Islamic faith and practice daily. The entire planet must do this within 2 weeks. It’s easy — you wear a hat and face Mecca to pray every day. There are a few extra rules for women though. Remember it will be your duty to kill those that cannot be converted — they are the infidels.

    I hope you can convince your children to convert, but if not (and you don’t have the heart to kill them yourself), don’t worry; there are tens of thousands of extremist Muslim Arab males that will gladly do it for you. This is all they want and once this is accomplished there will be peace. Maybe.

    We’re not going to war: it’s coming to us. Many Americans are ignorant of this or don’t want to face this reality. The military and our government do know how threatened we are and the fragility of the world economy and civilization. They know of Saddam Hussein’s involvement with 9/11 and terrorists. If the civilized world can’t stop this growing menace, then we should all be prepared for severe hardship as we bow down before dictators and terrorists.

    ”’Mike Brown is a resident of Mililani and can be reached via email at”’ mailto:brownm001@hawaii.rr.com

    Learning More About the General Excise Tax

    0

    With the legislative session right around the corner, it might be worthwhile to review some basics about Hawaii’s tax system to help lawmakers avoid making mistakes. Most of the misunderstandings about Hawaii’s tax system occur in the area of the general excise tax largely because people think of it as a “sales tax” commonly found on the mainland. However, unlike the retail sales tax found on the mainland, it is the responsibility of the business making the sale to pay the general excise tax as compared to the retail sales tax, which is the onus of the purchaser to pay that tax. This misconception probably occurs because consumers see the 4 percent or sometimes the 4.166 percent shown out separately on the receipt when they make a purchase. Sure it looks like the business is collecting the tax from the customer and therefore it must be the same thing as a sales tax. The difference lies in the complaints often made by customers that the business is charging more than the supposed 4 percent. Indeed, the statutory rate is set at 4 percent on all retail sales, but the 4 percent rate is applied to all of the gross income received by the business. So for many years, businesses collected what seemed to be the extra amount people called the sales tax, but when it came time to pay the tax collector, the business had to pay 4 percent on everything he or she took in, including the amount shown out separately as the 4 percent tax. So instead of just handing over the 4 cents collected on the sale of an item that cost a dollar, the business has to pay 4 percent on $1.04. That’s why businesses started passing along the extra 0.166 percent. While that amount may sound trivial, on a million dollars of gross income that amounts to $1,600 on the $40,000 collected as the general excise tax. So unlike the retail sales tax, which is merely collected by the business from the customer, the general excise tax is really on the seller or business making the sale. This misunderstanding often leads lawmakers or their staff into introducing measures to exempt the state or county governments from the general excise tax, thinking that this would be one way to reduce the cost of government. These bills usually are right up there vying for the dumbest bills of the session. The drafters obviously don’t realize that neither the state nor the counties are subject to the general excise tax. It is the vendors from whom the state or counties purchase goods or services that are subject to the 4 percent tax. Someone did get it right last session and proposed exempting businesses selling to the state and counties. While technically correct, what the sponsor of the bill missed in introducing the bill is that not only would the state and counties save on the cost of the tax, but more importantly, the state would have to go without those revenues. And from an equity point of view, only vendors who sold goods and services to the state would enjoy the exemption. Their competitors selling the same goods and services would have to continue to pay the 4 percent tax. In fact, blanket exemptions for certain types of services or goods puts other businesses at a disadvantage and increases the pressure to raise tax rates to make up the lost revenue. For example, a popular proposal calls for an exemption for food from the tax base because we all have to eat. That exemption would favor people who sell food while vendors of say, clothes or shoes, would have to continue to pay the tax. And if the demand for revenues to run state government is not alleviated, then the tax rate on those other businesses may have to go up. Similarly, there have been proposals to exempt medical services from the 4 percent tax because “people should not be taxed just because they are sick or injured.” That proposal ignores the fact that medical services also are provided to people who are well, as a matter of prevention. It also ignores the scenario of continuing to tax the auto mechanic who is working on the Porsche of the doctor who would be exempt from the excise tax under the proposal. Fundamental to the understanding of the state’s general excise tax is the fact that the tax is imposed on the gross income of the person or business making the sale of goods or services. It is imposed on everyone who sells goods or services in the state when these goods or services are provided by other persons in the state. This latter point is where there is a misunderstanding of goods sold by non-profits that are also sold by local businesses. This is because the sale of that sausage or sweetbread is in direct competition with the business who has to pay the 4 percent tax on that same sausage or sweetbread. More next week on Hawaii’s unique tax system. ”Lowell L. Kalapa is the president of the Tax Foundation of Hawaii, a private, non-profit educational organization. For more information, please call 536-4587 or log on to” https://www.tfhawaii.org

    Responding to Those Who Oppose the War

    Al-Qaeda stated after 9/11 that their goal is to “bring down western civilization and create a global Islamic empire.” They want nothing more, nothing less. U.S. foreign policy is inconsequential when considering the bigger picture. The war is not about our supporting Israel or having military in the Middle East or even oil. It’s about religion and it’s growing. There is an easy way to stop the war: everyone in America and the rest of the world must take up the Islamic faith and practice daily. The entire planet must do this within 2 weeks. It’s easy — you wear a hat and face Mecca to pray every day. There are a few extra rules for women though. Remember it will be your duty to kill those that cannot be converted — they are the infidels. I hope you can convince your children to convert, but if not (and you don’t have the heart to kill them yourself), don’t worry; there are tens of thousands of extremist Muslim Arab males that will gladly do it for you. This is all they want and once this is accomplished there will be peace. Maybe. We’re not going to war: it’s coming to us. Many Americans are ignorant of this or don’t want to face this reality. The military and our government do know how threatened we are and the fragility of the world economy and civilization. They know of Saddam Hussein’s involvement with 9/11 and terrorists. If the civilized world can’t stop this growing menace, then we should all be prepared for severe hardship as we bow down before dictators and terrorists. ”Mike Brown is a resident of Mililani and can be reached via email at” mailto:brownm001@hawaii.rr.com

    Perception Versus Reality

    Over the past 40 years, there has been much talk about the “perception” that Hawaii has a bad business climate, residents are highly taxed, schools are inferior, etc.

    The standard defense used by the “former incumbents” was to either attack the messenger, or claim that “reality” is somehow different, and the “perception” is erroneous.

    Sure, sometimes perceptions are wrong, and reality is truly different. We all know people who have been “defamed” that were in reality wonderful, honest, caring and helpful. (True in particular of Republicans running for office.)

    And, conversely, someone who was perceived as being “wonderful, honest, caring and helpful” was, in reality, dishonest and after power, money, or both. (Often Democrats, i.e. members of the Honolulu City Council.)

    Did you notice a change in the perception of Hawaii’s business climate immediately after Linda Lingle was elected governor? At last, after a 40 year wait, Hawaii is now perceived as “Open for Business” by most of us in the (small) business world.

    This “perception” will last for quite a while, and with a little luck, long enough for “reality” to catch up. Gov. Lingle (wow, I really liked typing that) is working hard to mend the bureaucracy, streamline regulations, simplify the tax structure and make government more responsive to the citizens.

    Changing the reality: That will be the biggest problem she faces … especially if the incumbents try to throw up road-blocks and position themselves for the 2004 elections. It is up to us to let them know that we voted for change, we expect change and they must change. Or, at least allow change.

    The necessary changes will take time. The problems were created over a 40-year period, and can’t be eliminated overnight. But they can be eliminated if they are exposed to the light of day … and Gov. Lingle will see to that.

    Won’t it be nice to have articles and editorials in mainland publications that comment on how much the business climate “reality” in Hawaii has improved since the leadership was changed? Let’s give the governor and her new leadership team about 6 months, then we will be able to “kiss the messenger” instead of killing him. I can’t wait.

    ”’Bud Weisbrod is a resident of Honolulu and can be reached via email at”’ mailto:weisbrod@myexcel.com

    Bush Proposes SEC Funding Boost

    0

    WASHINGTON, Jan. 11 (UPI) — Pres. George W. Bush on Saturday announced increased funding for federal initiatives to crack down on corporate fraud in an effort to restore investor confidence that was severely damaged last year in a string of scandals that rocked Washington and Wall Street.

    “Our country has made great progress in restoring investor confidence, and putting the recession behind us,” said Bush. “We cannot be satisfied, however, until every corporate wrongdoer is held to account, and every part of our economy is strong, and every person who wants to work can find a job.”

    Bush used his weekly radio address to the nation to detail his plan to seek what the White House called historic level of funding in his 2004 federal budget proposal for federal investigators, prosecutors and regulators to enforce corporate governance laws enacted last year.

    The financial community and Washington were stunned last year by the demise of Enron, an energy trading company, and by alleged corporate fraud within the telecommunications company WorldCom and other large corporations. Those scandals led to the layoff of thousands of workers, many of whom lost nearly all the value in their pension plans, 401(k) plans and other company benefits while high-ranking company executives walked away with millions of dollars after cashing out their own stock options early.

    Bush said he is asking Congress to approve $842 million for the Securities and Exchange Commission, the largest funding increase in the agency’s history. The request would allow the agency to hire new accountants, lawyers and examiners. It will also replace and upgrade computer systems.

    The president’s budget proposal would also boost funding for the U.S. Department of Justice, adding $25 million to expand the agency’s investigation and prosecution abilities. The FBI would receive $16 million to hire 56 agents to investigate corporate fraud. It will also fund hire more attorneys.

    Bush is seeking a 10 percent increase in funding for the U.S. Department of Labor’s efforts to recover approximately $500 million in pension plan assets. This funding would provide additional enforcement to safeguard workers’ retirement savings and other benefits in the wake of corporate fraud cases. Funding will also be used to expand compliance assistance efforts to educate employers and pension plan administrators on their responsibilities under the new pension laws.

    The president in July signed into law accountability legislation giving federal officials new authority to investigate fraud and wrongdoing in the corporate community and provides for tough oversight of the industry.

    Copyright 2003 by United Press International. All rights reserved.

    Perception Versus Reality

    Over the past 40 years, there has been much talk about the “perception” that Hawaii has a bad business climate, residents are highly taxed, schools are inferior, etc. The standard defense used by the “former incumbents” was to either attack the messenger, or claim that “reality” is somehow different, and the “perception” is erroneous. Sure, sometimes perceptions are wrong, and reality is truly different. We all know people who have been “defamed” that were in reality wonderful, honest, caring and helpful. (True in particular of Republicans running for office.) And, conversely, someone who was perceived as being “wonderful, honest, caring and helpful” was, in reality, dishonest and after power, money, or both. (Often Democrats, i.e. members of the Honolulu City Council.) Did you notice a change in the perception of Hawaii’s business climate immediately after Linda Lingle was elected governor? At last, after a 40 year wait, Hawaii is now perceived as “Open for Business” by most of us in the (small) business world. This “perception” will last for quite a while, and with a little luck, long enough for “reality” to catch up. Gov. Lingle (wow, I really liked typing that) is working hard to mend the bureaucracy, streamline regulations, simplify the tax structure and make government more responsive to the citizens. Changing the reality: That will be the biggest problem she faces … especially if the incumbents try to throw up road-blocks and position themselves for the 2004 elections. It is up to us to let them know that we voted for change, we expect change and they must change. Or, at least allow change. The necessary changes will take time. The problems were created over a 40-year period, and can’t be eliminated overnight. But they can be eliminated if they are exposed to the light of day … and Gov. Lingle will see to that. Won’t it be nice to have articles and editorials in mainland publications that comment on how much the business climate “reality” in Hawaii has improved since the leadership was changed? Let’s give the governor and her new leadership team about 6 months, then we will be able to “kiss the messenger” instead of killing him. I can’t wait. ”Bud Weisbrod is a resident of Honolulu and can be reached via email at” mailto:weisbrod@myexcel.com

    Bush Proposes SEC Funding Boost

    0

    WASHINGTON, Jan. 11 (UPI) — Pres. George W. Bush on Saturday announced increased funding for federal initiatives to crack down on corporate fraud in an effort to restore investor confidence that was severely damaged last year in a string of scandals that rocked Washington and Wall Street. “Our country has made great progress in restoring investor confidence, and putting the recession behind us,” said Bush. “We cannot be satisfied, however, until every corporate wrongdoer is held to account, and every part of our economy is strong, and every person who wants to work can find a job.” Bush used his weekly radio address to the nation to detail his plan to seek what the White House called historic level of funding in his 2004 federal budget proposal for federal investigators, prosecutors and regulators to enforce corporate governance laws enacted last year. The financial community and Washington were stunned last year by the demise of Enron, an energy trading company, and by alleged corporate fraud within the telecommunications company WorldCom and other large corporations. Those scandals led to the layoff of thousands of workers, many of whom lost nearly all the value in their pension plans, 401(k) plans and other company benefits while high-ranking company executives walked away with millions of dollars after cashing out their own stock options early. Bush said he is asking Congress to approve $842 million for the Securities and Exchange Commission, the largest funding increase in the agency’s history. The request would allow the agency to hire new accountants, lawyers and examiners. It will also replace and upgrade computer systems. The president’s budget proposal would also boost funding for the U.S. Department of Justice, adding $25 million to expand the agency’s investigation and prosecution abilities. The FBI would receive $16 million to hire 56 agents to investigate corporate fraud. It will also fund hire more attorneys. Bush is seeking a 10 percent increase in funding for the U.S. Department of Labor’s efforts to recover approximately $500 million in pension plan assets. This funding would provide additional enforcement to safeguard workers’ retirement savings and other benefits in the wake of corporate fraud cases. Funding will also be used to expand compliance assistance efforts to educate employers and pension plan administrators on their responsibilities under the new pension laws. The president in July signed into law accountability legislation giving federal officials new authority to investigate fraud and wrongdoing in the corporate community and provides for tough oversight of the industry. Copyright 2003 by United Press International. All rights reserved.

    CrimeStopper Report: Missing Child – Daniel Gilman

    0

    The Honolulu Police Department’s Child Abuse Detail, Missing Child Center Hawaii, and CrimeStoppers want to ask for the public’s assistance in locating Daniel Gilman. Gilman left an Olive Street residence in Wahiawa on Christmas night with his maternal grandfather Derick Gilman.

    Daniel is believed to be with Derick Gilman at this time. They were seen last on Tuesday afternoon, January 7th in the Pearl Ridge area riding on a city bus. Derick Gilman has three outstanding warrants at this time and has no legal custody of Daniel.

    Witnesses to this case may call Detective Erik Iinuma directly at 529-3099, or Missing Child Center-Hawaii at 753-9797, or anonymous calls may be made to CrimeStoppers at 955-8300, *CRIME on your cellular phone. Free cellular calls are provided by AT&T, Nextel Hawaii, and Verizon Wireless Hawaii.

    *Daniel Gilman,

    Hawaiian-Filipino male,

    9,

    4’10”,

    125 lbs.,

    Husky build,

    Dark brown short hair,

    Brown eyes

    *Derick Gilman aka Erick Kanamu, George H. Wright,

    Hawaiian male,

    49

    5’10”,

    160 lbs.,

    Medium build,

    Brown hair,

    Brown eyes,

    Mustache

    ”’Honolulu CrimeStoppers Inc., will pay a cash reward of up to $1,000 for information which results in the arrest of a wanted person or the solving of case(s) reported to CrimeStoppers Honolulu Inc. All calls are confidential. Do not approach any suspect. All suspects and wanted fugitives should be considered armed and dangerous. All calls are confidential and anonymous. Persons who participate in the crime, or are victims of the crime are ineligible to receive CrimeStoppers rewards. Be a CrimeStopper and call the hot line at 955-8300 or *Crime on your cellular telephone. 007/03 Access the CrimeStoppers Web site at”’ https://www.crimestoppers-honolulu.org

    CrimeStopper Report: Missing Child – Daniel Gilman

    0

    The Honolulu Police Department’s Child Abuse Detail, Missing Child Center Hawaii, and CrimeStoppers want to ask for the public’s assistance in locating Daniel Gilman. Gilman left an Olive Street residence in Wahiawa on Christmas night with his maternal grandfather Derick Gilman. Daniel is believed to be with Derick Gilman at this time. They were seen last on Tuesday afternoon, January 7th in the Pearl Ridge area riding on a city bus. Derick Gilman has three outstanding warrants at this time and has no legal custody of Daniel. Witnesses to this case may call Detective Erik Iinuma directly at 529-3099, or Missing Child Center-Hawaii at 753-9797, or anonymous calls may be made to CrimeStoppers at 955-8300, *CRIME on your cellular phone. Free cellular calls are provided by AT&T, Nextel Hawaii, and Verizon Wireless Hawaii. *Daniel Gilman, Hawaiian-Filipino male, 9, 4’10”, 125 lbs., Husky build, Dark brown short hair, Brown eyes *Derick Gilman aka Erick Kanamu, George H. Wright, Hawaiian male, 49 5’10”, 160 lbs., Medium build, Brown hair, Brown eyes, Mustache ”Honolulu CrimeStoppers Inc., will pay a cash reward of up to $1,000 for information which results in the arrest of a wanted person or the solving of case(s) reported to CrimeStoppers Honolulu Inc. All calls are confidential. Do not approach any suspect. All suspects and wanted fugitives should be considered armed and dangerous. All calls are confidential and anonymous. Persons who participate in the crime, or are victims of the crime are ineligible to receive CrimeStoppers rewards. Be a CrimeStopper and call the hot line at 955-8300 or *Crime on your cellular telephone. 007/03 Access the CrimeStoppers Web site at” https://www.crimestoppers-honolulu.org