Ka Wai Ola - Office of Hawaiian Affairs, Volume 6, Number 6, 1 June 1989 — Taxes and You [ARTICLE+ILLUSTRATION]
Taxes and You
By Lowell L. Kalapa, Director Tax Foundation of Hawaii
Tax Review Commission Seeks Public Comment
By Lowell L. Kalapa, Di» ector Tax Foundation of Haw^ii
Workii i quietly but in earne is the latest Tax Rev jw Commission ana soon you will have an opportunity to share your opinions with them about how you believe the tax system ean be improved. Often iisunderstood, the Ta:< Review Com-
mission doesn't have the power ' e change the tax laws. Rather, the state constitution mandates that the commission condur t a s',s e natic review of the state's tax structure usirg 3uch standards as equity and efficienc . Jpr; i their review, the commission is to make rccommendations to the legislature with r<°spect :c, revint e and tax policy. This is the sec und tt'ernpt to e valuate the state's tax system (or i hird iepending on if you count the first body whieh rc signed without making a report due to the laek of funding). The current commission began its task !ast July and will have to submit ts fina! report to the 1990 session of the state legisiature by December of this year. In the 18 months from start to finish, the eommission has had to: set the parameters of its study; it must now talk with experts and consultants; and
will have to seek public comment through hearings, do its own investigative research, and last but not least, eome to its own conclusions and make recommendations for changes in tax and revenue policy. It sounds like an awfully big task, and it is. Howevev, the importance of the commission's work cannot be overstated as the tax system affects all citizens of our state. The project that the commission presents to the legislature later this year is certainly not going to be unanimously praised as the commission has the difficult job of making objective and nonpolitical decisions. In other words, unlike lawmakers and other elected officials, the commission is not in the business of making politically popular choices such as giving rebates or tax credits for this or that political cause. As stated in the constitutional mandate, the commission is to make recommendations to improve the equity and efficiency in the tax system. Equity means that .everybody pays their fair share according to their ability to pay and no one gets a special "break" for some non-eeonomie reason. Efficiency means that the tax system does not impose additional costs on taxpayers and the economy as a whole, adding costs over and above the actual eolleehon of tax dollars. As times have changed and the need for tax dollars has grown, the tax system has been molded by the demand for funds. Originally, government in
Hawai'i was almost entirely dependent upon the real property tax as was most of the nation during the early part of this century. Only with the advent of the ineome tax and later the sales tax has the real property tax taken such a small role in the financing of government in Hawai'i. Even the federal tax law, at least until the 1986 Tax Reform Act, was an accumulation of this or that special provision as the constant search for additional revenues pushed the ineome tax further and further into all types of ineome. Special provisions "saved" certain taxpayers and carved out special treatment for those who had lobbied hard. With taxpayers becoming increasingly aware of the demands that federal, state and loeal governments make on their pocketbooks, there is a push to integrate the tax system and make more "sense" and "balance" out of the taxes we pay. There are also some issues whieh are politically unpopular, and while the legislature will still have to enact any changes, the commission is in the position to point out problems with the tax system that may be politically sensitive. For example, this year's legislature has already "punted" some political!y "hot potatoes" to the commission for "further study" and evaluation. However, it should be realized that just because the Commission is going to study the problem doesn't mean that the legislature is going to take the commission's advice. see Tax Commission, next page
Tax Commission
from page 20 Indeed, the work of the first commission was met with mixed reviews as it tended to concentrate on the eeonomie aspects of the tax system and left mueh of the technical elements wanting. While failing to meet the expectations of the puhlie and the legislature, the first commission covered ground necessary for subsequent commissions to build upon but not necessarily cover again. It appears that this commission will concentrate on two types of recommendations. First, recommendations that will attempt to address any deficiencies in the system. The second type of recommendation appears to be headed in the direction of balancing the changes in the political and eeonomie climate in Hawaii and the trends in federal and state tax policy. What's your opinion? You play an important role. All during this month of June, the commission will be holding public hearings throughout the state to take your eomments and suggestions into consideration. If you feel strongly that certain changes should be made to our tax system, then this is the time to make your thoughts known. The schedule for public hearings is as follows: O'ahu June 13 State Capitol Auditorium 9 a.m. to 12 noon Kaua'i June 16 Lihue, State Office Bldg. 9 a.m. to 12 noon Hawai'i June 23 Hilo, State Office Bldg. 8:30 to 11:30 a.m. Kona, State Office Bldg. 2 to 5 p.m. Maui June 30 Wailuku, State Office Bldg. 9 a.m. to 12 noon Copies of the commission's interim report to the legislature outlining their progress are available at all state public libraries and at the branches of the state tax office.