Ka Wai Ola - Office of Hawaiian Affairs, Volume 5, Number 12, 1 December 1988 — Taxes and You [ARTICLE+ILLUSTRATION]

Taxes and You

By Lowell L. Kalapa, Director Tax Foundation of Hawaii

Hike In Highway Taxes Possible

With the legislative session right around the corner, taxpayers are no doubt curious whether or not taxes will be a major issue for lawmakers. Although there is a substantial surplus in the state general fund, the fiscal health of the state highway fund is

another matter. It is estimated that unless some steps are taken in the next legislature, the state highway program will operate in a deficit by the end of this fiscal year to the tune of nearly $1 million. How ean it be that the highway program is going broke while lawmakers talk about a surplus? Remember the state highway fund is a special ftind with its own sources, primarily the state taxes on fuel, vehicle registraion, and vehicle weight. It also receives the revenues generated by the 4 percent excise tax imposed on the sale of gasoline for highway use. However, the state highway fund receives no funds from the general fund. So why is the state highway fund broke? One major reason is that its revenues sources are set, and are' based on the number of units sold or the number of pounds that a vehicle weighs. Since the fuel crisis of the 1970's, consumers have moved toward more fuel-efficient and lighter vehicles. As a result, instead of fuel consumption growing in direct proportion to miles traveied on state highways, the number of miles has outstripped the amount of gasoline sold. More fuel-ef-ficient cars get a high number of miles per gallon, in part because car makers used materials whieh reduced the weight of automobiles. Thus, the growth in the vehicle weight tax collections also

slowed. As a result, the financing of the highway program has been the subject of review every few years. Some observers have wondered why no permanent solution has been sought to avoid these periodic reviews. For example, at one point the department considered changing the basis for the fuel tax from the cent per gallon approach to one tied to the wholesale price of gasoline. This suggestion eame at a time when the price of oil was going through the roof and the perspective was one of ever-rising fuel prices, contributing greater and greater collections of fuel taxes. Looking back now, such a change would have been disastrous as the fall in the price of oil would have devastated fuel tax collections. Others have suggested alternative indexing schemes, all of whieh have been rejecteci because of the uncertainty associated with tyingthe tax to a indicator over whieh there was no control. So why is the current means of financing the highway program retained? A major eoneem shared both by public finance officials and legislators is the closed system that the highway special fund represents. Since the revenues generated for this fund ean only be used for highway projects or programs, there is a need for periodic review to insure that the revenues match the needs of the program. Should more than sufficient revenues be raised, there may be the temptation to do more than is necessary to meet the public need for highways. Similarly, if there isn't a need for a certain type of project or program, policymakers ean adjust the financing of the highway program. Thus, the periodic review allows officials to not only look at the revenue needs but also the spending program for whieh those revenues must be raised. What about those highway taxes? Are they fair and does the system tax highway users equitably?

The three major tax sources of the highway fund are the fuel tax, the weight tax, and the registration fee. Eaeh source measures and taxes users aecording to their use of the highways. The fuel tax is based on the number of gallons of fuel used during any one year. The more miles a car goes on the public highways, the greater number of gallons used, and the greater the tax. Similarly, the weight tax reflects the wear and tear a vehicle places on the public highways. The heavier the vehicle, the greater the wear on the pavement. Thus, a heavier car will pay more than a light compact. Finally, the registration fee ean be viewed as a privilege tax or eall it an entrance fee, imposed for the privilege of entering one vehicle upon the public highways. Thus, the tripod of highway tax resources is designed to reflect the individual use of eaeh vehicle on our highways. The occasional driver will pay the same in registration fees as the daily eommuters but less in fuel taxes. What ean we expect next year? Well, lawmakers will be asked to increase highway taxes to keep up with the cost of maintaining our public highways. How mueh lawmakers approve in the way of spending will have a direct bearing on how mueh of a tax increase will be necessary. »••••••••••••••••••••••••••••••••••••••••' Know the warning signs of a heart attack! 1. Uneomfortable pressure, fullness, squeezing or pain in the center of your chest lasting two minutes or longer. 2. Pain may spread to the shoulders, neek or arms. 3. Severe pain, dizziness, fainting, sweating, nausea or shortness of breath may also occur. If you show these symptoms, the Amenean Heart Association says "Get help immediately!"