ALTHOUGH Gov. Ben Cayetano's Economic Revitalization Task Force first said it was making solid recommendations and then changed it to say those recommendations might be modified, it is now becoming clearer that major portions of the plan are in play. Task force proposals could change
Even before the state Legislature meets next year on the task force plan, Cayetano is acknowledging that the plan is going to see changes and perhaps even major revisions at the hands of the Legislature.
In a meeting with reporters yesterday, Cayetano reviewed what he hopes to accomplish with the economic plan.
First, he said, is to export about 25 percent of the tax burden. To do this he wants tourists to pay more taxes. That's done by raising taxes on food, retail spending and hotels.
The second goal is to lower corporate and personal income taxes.
If corporate taxes are lowered, Cayetano figures it would send a message across the nation that Hawaii is shaping up and looking to deal.
Just as important, however, is to reduce income taxes, because the governor also wants to lure those fabled computer workers to Hawaii.
In the Northwest, thanks to the booming success of Microsoft and the stock-option-created millionaires employed by the world's largest software manufacturer, it isn't uncommon to see people still under 30 buying homes for $800,000.
That's the kind of boom mentality Hawaii readily adapts to, so it is easy to see how Cayetano would want to get some of those folks out here, happily designing new computer programs or tinkering with other nonpolluting portions of the high-tech industry.
But Cayetano says these people are keenly aware of quality of life issues and also economic issues. So if they are moving to paradise, it had better include low taxes.
"The tax package was meant not only to revitalize Hawaii's economy from within, but to give signs to investors on the outside that Hawaii has made some changes," Cayetano said.
The change from previous announcements, however, is that now Cayetano sees the reduction of income taxes as the opposite side to excise tax increases.
Raise the excise tax, lower the income tax; don't raise excise taxes very much and reduce the bite in income-tax cuts.
That is not all there is to the system of pulleys working this tax package. Cayetano told reporters that small business doesn't understand or hasn't grasped the significance of reducing the pyramiding effect of the excise tax. By lowering the excise tax rate in exchanges between companies, Cayetano said, the state will lose $158 million in just the first year alone.
One way to reduce the heat from businesses saying they don't want the excise tax to rise is to cut the other.
IMAGINE pulling on one end of the rope and taxes go down, which causes other taxes to go up somewhere else. Excise tax goes up, income tax comes down; pyramiding excise tax is dropped, excise tax not raised much and income taxes can still be cut.
This is just the sort of nutrient-rich media that legislative ideas multiply. So by the time the Legislature ends and neither Cayetano nor any others on the economic task force can recognize their plan, and the public is wondering why their taxes became so confused, just be thankful that the goal was reform and not simplification.
Read the full text of the
Economic Task Force recommendations.