TALK about raising the general excise tax is too emotional. It will hurt the poor. It will hurt small business. It will help the rich. Don't do it. Don't let emotion thwart GET increase
Let's think more soberly. The proposal of the Governor's Economic Revitalization Task Force is to raise it one-third - from 4 percent to 5.35 percent.
Opponents contend correctly that it hurts the poor disproportionately. Yes, but a poor economy hurts even more, and things aren't totally lopsided. Example: A low income worker spends all his $10,000 take home pay here and pays today's 4 percent GET of $400. With $100,000 after taxes a rich person might invest or spend out-of-state $40,000 but still pay $2,400 GET on $60,000 spent here.
The stronger points for the GE tax are:
It is relatively easy to collect, relatively hard to cheat on.
Rich people send many of their kids to private schools and often off to mainland universities. This reduces the state's bill for K-12 public schools and the UH system. UH tuitions are a national "best buy" because of GET support for UH.
We even have a system for offsetting the GET hit on the poor. It's called the negative personal income tax. If your income is low enough you can file a personal income tax form and get money back from the state. What's so bad about that?
"Conscience-stricken" legislators - meaning those worried about negative flak in the election campaign if they vote to boost the GET - can even balm their consciences by sweetening the returns to the poor via the negative income tax.
I put "conscience-stricken" in quotes because a truly conscientious legislator ought to be brave enough to go along with the Economic Revitalization Task Force package as the only viable economic recovery plan on the table. Its tax features have boosted economic activity in New Zealand and several mainland states.
THIS includes reducing the top personal income tax rate below 10 percent so that we won't stand out from other states as a bad place to live and invest. The electronic age has made a lot of American small businesses footloose and able to pursue their fantasies. More might pursue them even to the extent of locating in this attractive part of the world. They add a few jobs as they come and draw income from elsewhere.
Our economy has been flat for four years. It could drop into clear recession if Asian visitors and businesses pull out because of Asia's financial troubles.
Our only realistic hope for government-spurred stimulation lies in the task force proposals. We will be hurting ourselves - all of us- if we let emotion prevail over reason in the tax debate and on other proposals in the package.