DOES anyone remember 1995? Have we become such captives of government spin doctors that keeping more than one thought in our heads at a time strains the brain? Repairing damage from
1995 tax measureHow shall we puzzle out what to do next, if all things past are a blank slate?
The amazing fact about the current economic debate capturing legislators' attention in Honolulu is that they walked this furrow already. After seeing the problem coming, they figured out how to deal with it.
You can argue that the governor and the Legislature are trying to repair the damage done back in 1995.
In carpentry, the rule of thumb is "measure twice, cut once." Down at the Capitol, the motto is: Cut them, nail them back and then cut it again."
The items being cut, stitched back together and then cut again are our state taxes.
Back in 1995, Gov. Ben Cayetano got a dose of bad news. The state budget didn't balance. Actually, that should not have been much of a surprise, since the state was spending more than it was taking since 1991, but you can't be expected to remember everything.
So three years ago, Cayetano started looking for ways to cut state spending. The government spin doctors would like you to remember how the bloated payroll was pared, how some 3,000 jobs were eliminated, how departments were down-sized or streamlined.
What goes unsaid is that eliminating tax credits for the poor and sick was one of the first ways the governor and the Legislature dealt with the budget imbalance.
At the time, Republicans howled that the repeal amounted to tax increases.
The move, however, succeeded and everyone forgot that before 1995 local folks got tax credits for the money they gave the state for excise taxes on food and drugs.
Some taxes were cut completely, at the urging of Cayetano. Others were traded back and forth during that legislative session, but the result was the same: tax credits disappeared.
The food tax credit was cut in half. The low-income credit and the medical credit were abolished.
Those were key, because legislatures always knew that leaving Hawaii's excise tax to grind along unregulated was regressive. That is, it helped the rich and hurt the poor, because it took a bigger proportion of the paycheck from the poor.
Realizing that, the Legislature gave money back to those who paid taxes on food, drugs and medical expenses. You have to eat, you are going to get sick and Democrats were tiring of listening to the GOP carp about how they were taxing the sick and hungry.
THE other good thing about a tax credit is you can carefully aim it at those you want to help and miss all those who you want to pay. That means local people get a tax credit and tourists get taxed for all the food, drink and medicine they want to consume here.
So back in 1995 the Legislature and the governor voted to partially balance the budget by taking money away from local taxpayers, by cutting tax credits.
Now three years later, the debate at the Capitol is about giving money back to local taxpayers. This time it is income tax relief. The excise tax would stay just as high as it is now, or perhaps even go up.
The tax credit debate is now forgotten, and legislators may be hoping that their work today won't be remembered by the voters in November.
Richard Borreca reports on Hawaii's politics every Wednesday.
He can be reached by e-mail at rborreca@pixi.com