December 1996 Home   Newsletters

January 1997

February 1997

President's Message (Astrid Monson)
League Testifies on Proposed Tax Changes (Astrid Monson)
December General Membership Planning Meeting (Jean Aoki & Astrid Monson)
Member Alert
This Land Was Your Land (Donella Meadows)
In Memoriam
Sexual Harassment (Ina Percival)
Vote Count (Arlene Ellis)
Domestic Violence and Welfare (Suzanne Meisenzahl)
Planning & Zoning Committee Needs More Members (Astrid Monson)
Orientation Meeting (Grace Furukawa)

League Testifies on Proposed Tax Changes

The December 13 Advertiser's front page headlined two contrasting reports. One detailed the recommendations of the State Tax Review Commission to cut the 4% General Excise Tax to ½% – a decrease of 12½% ; to stretch out the State income tax brackets so as to lower the thresholds at which higher tax rates phase in; and to delay for ten or fifteen years its previous recommendation to tax pension incomes.

The other article summarized a report by the State Tax department that November excise tax collections were down 12.7%, or $9.4 million, from last year's, while State income tax collections were down 13.1%, or $11.5 million. On December 15, again on the front page, the Advertiser reported that its Christmas Fund donations were "falling short of families' needs", with donations so far amounting to only 20% of 1994's totals.

Every few days we read that private social service agencies are complaining that they are overburdened as more Federal and State funds for health and medical service, welfare and unemployment assistance, etc., are phased out.

On October 30 the State Tax Review Commission, which meets every five years, held a public hearing to hear testimony on its draft recommendations. Arlene Ellis presented Honolulu League's testimony. Excerpts follow:

The "League of Women Voters, both nationally and locally, believes that tax revenues should be adequate to meet the community's legitimate needs for public services and facilities, and should be shaped to bear most heavily o those best able to pay them. You indicate that fundamentally Hawaii's taxes are too high and that government spending must be reduced. We do not necessarily share this premise. The 1995 issue of the State Data Book estimated State and local taxes in Honolulu to vary from 7.4% of a gross family income of $25,000 to 9.9% at $100,000 level. These figures are compared with a national median for larger cities of 7.9 and 9.9% respectively. In view of expected Federal spending cuts and the increased burden those will place on the State, and the present critical fiscal situation of both the State and City of Honolulu, we doubt that it is feasible to reduce State tax revenues at this time.

With regard to the income tax, we have long criticized it as charging an essentially flat tax above a starting point which is too low. We have recommended a graduated increase above 10%, maxing out, perhaps, at 13% at incomes over, say $500,000. This would not only be less regressive but would raise additional revenue.

As to pension income, we strongly support taxing it. We have long found it inequitable that a working family – perhaps with two wage earners and the costs of child care – is taxed $5,075 on a combined taxable income of

$60,000 while a family living on a pension of the same amount pays nothing to support public services and facilities it uses.

With respect to the excise tax, we are in full support of your recommendation to eliminate unjustified preferential exemptions. We must, however, question any reduction of the basic 4.0% rate. Would it not be better to keep it as it is and apply any net increase resulting from the elimination of preferential rates to reducing the State's bonded debt and the interest due thereon? To meet the critical needs in such services as education, health, welfare, etc., which are already suffering major shortages and will do so even more as Federal cut-backs come down the line? To pay for such relatively minor capital improvement items as acquisition of land for the State Ka Iwi park at Queen's Beach instead of losing this once-in-a-century opportunity or adding its cost to the State's debt obligations?

Furthermore, we would oppose reduction in the 4.0% rate because it would apply even to upper-income residents and to out-of-state visitors, thus unnecessarily losing substantial revenue. Would it not be better to reinstate the tax credits recently eliminated or reduced for such groups as the low-income tax-payer, low-rent payers, food, and others, specifically targeted at increasing the progressivity of the essentially regressive excise tax? We would recommend eliminating the remaining $27 per capita which is given to rich and poor alike.

There is, of course, a certain amount of waste and inefficiency. Expenditures could be cut if these were eliminated. This is perennial hope and will take time at best. In the meantime we don't think it is practical to reduce expenditures on needed services and facilities to make up for this. Unfortunately, expenditure cuts on the latter are easier to make than elimination of the former".

The Commission's recommendations will be presented to the 1997 Legislature for action.

Astrid Monson

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