Taking aim at
tax ‘pyramiding’
An atypical group sets out to
by Russ Lynch
eliminate the tax on a tax
Star-BulletinBeverly Harbin gripes that when her small auto-repair business buys a can of paint from a wholesaler to touch up a car, it must pay the 4 percent general excise tax rate.
But if they just sold the paint to the car's owner at retail and let him do the painting, the wholesale transaction tax would be just one-half a percent.
In the first case, the Kakaako auto shop will pass its 4 percent tax cost to the customer on top of the 4 percent general excise that it must charge for the entire repair job.
That's the kind of tax "pyramiding" that Harbin and her husband, Earl -- and many other small-business people -- are pushing the Legislature to change.
Beverly Harbin, spokeswoman for the new Small Business Economic Revival Force, said the group contends that if government lets entrepreneurs get on with the job and make a profit, businesses will thrive. And if enough of them thrive, the argument goes, the overall taxes they generate would outweigh the immediate loss of income from doing away with pyramiding.
In that argument, the new organization that the Harbins helped form is like several other groups representing thousands of small businesses.
But the new group differs from the others, she said, because each representative who lobbies legislators or the governor is an actual business operator -- rather than paid executive or lobbyist for a trade association.
They do represent trade and business groups -- more than 40 of them, in fact -- but they are also the people who feel the pinch themselves every day.
SBER, whose members call it "Saber Force," is different in another way, Harbin said. It's not a government adversary and it has a good relationship with Gov. Ben Cayetano.
The group says it seeks -- in partnership with the state administration and government leaders -- to reduce taxes on business; reform burdensome regulations; reform tort laws to prevent "lawsuit abuse"; provide incentives to create and operate businesses; and reduce the cost of government.
There's another way the group differs from the older ones. "We're new, we're angry and we're in a hurry," said Audrey Hidano, secretary-treasurer of Hidano Construction.
Realtor Bill Ramsey, representing the Honolulu Board of Realtors on SBIR's board, said small-business groups too often play the role of adversaries in their relations with government. "You don't get things done arguing with the administration," he said. That doesn't mean they won't have some forceful discussions, though. Right now, the top issue on SBIR's list is getting the 4 percent tax reduced on a string of items. Mostly they have to do with the sale of services to small businesses that are themselves service businesses -- hiring people to clean the premises, do landscaping, dispose of trash, provide legal or accounting advice and so on. Such services are charged at the 4 percent general excise tax rate. They should all be at one-half a percent, the organization said.
Another target is cutting corporate income tax, but Harbin said that may not be an immediate concern to many members because before small businesses can pay any income taxes, they have to be making a profit. Many businesses she knows don't pay income taxes "because we're broke."
Small-biz advocates
Who: Small Business Economic Revival Force
