Economics is Not Subject to the Whims of Man

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Economics is not subject to the whims of man. It is field governed by a set of laws as absolute as the laws of gravity or thermodynamics. It is these laws that those in government routinely seek to violate without consequence, who are then surprised when the result is adverse consequences.

Hawaii is unique and this has given rise to a fallacy that is slowly destroying the economy here. This fallacy is translated into tax policy, and that policy impoverishes the very businesses that, in total, make up the economy of this state. This fallacy can be stated as follows: The taxes paid by tourists don’t hurt local business and is “free money” because it is paid those same tourists, instead of local residents.


Even those who in principle know better still commit this fallacy from time to time. Thus we have Governor Lingle proposing an airport departure fee, with the justification that almost everyone else is does it, and since it charges tourists as they are leaving it can’t be detrimental to the economy. It isn’t a tax, it’s just a little fee to help fund the airports.

To understand why this is damaging to local businesses you have to put yourself in the place of the tourist. A family planning a trip to the Islands is, nine times out of ten, on a budget. They have saved for a year or longer for their trip and have a limited budget that they must adhere to in order to be able to afford their sojourn into paradise. They have a finite pool of money from which to pay for everything associated with their trip.

The plane tickets will be purchased before the trip, so the damage of the departure tax to the budget will already have been done, not afterward as some think. For a family of four this will mean somewhere between $14 and $20 less for their trip.

Big deal, what’s $15, you say?

That’s a couple hamburgers at the local burger joint. Maybe an air mattress to float on in the surf at Waikiki. A beach towel here or a six pack of soda skipped there. It could be anything. The one thing certain is, it will result in that much less being spent at commercial establishments. It is that much less income for a private enterprise. It is that much less revenue available to keep local businesses afloat. Multiply that times a million tourists and it is the difference between profitability and bankruptcy.

This is why arguments that the local residents don’t pay the majority of a increase of the General Excise Tax or a 1 percent city tax are dead wrong. The local businesses pay the cost in terms of products not sold and services not rendered, because the tourists