In My View
Charles Djou

Sunday, August 7, 2005

Best tax policy is
not to raise them
in the first place

On Wednesday, the Honolulu City Council is poised to increase the general excise tax in what will be the largest tax increase in the history of Hawaii. On the same day, in a bout of immense irony, the Council also is prepared to pass a modest real property tax relief bill. The problem is that the Council has increased tax after tax after tax during the past two years and only now is realizing that people need tax relief. I submit that it would be far better to simply not raise taxes in the first place, and if tax relief is called for, cut taxes rather than offer tricky tax breaks with the potential for abuse.

During the past two years, your city government has increased virtually every tax and fee on the books, including:

» commercial property tax rate -- increased twice
» commercial property tax valuation increase
» residential property tax rate
» residential property tax valuation increase
» vehicle tax -- increased twice
» parking meter fee
» bus fares -- raised twice
» garbage tipping fee -- increased twice
» sewer fees -- to double over the next 10 years
» building permit fees
» park user fees
» auditorium fees
» wastewater hook-up fee -- increased twice

Now, on top of all of these tax hikes, the Council wants to pass a massive general excise tax increase. Add this all up and the average Oahu family will pay more than $1,000 per year in additional taxes and fees.

With all of these tax increases, the public has begun to complain that the burden is too much and relief is needed, especially in light of the hot real estate market that has caused so many property values (and thus property tax bills) to soar. The best way to cut the people's tax burden is simply to cut taxes. The Council could just reverse its decision to double the vehicle tax or reduce property tax rates.

Unfortunately, rather than move toward cutting taxes, the City Council is moving to foist a massive general excise tax increase and offer only a minor tax relief bill to the public. The proposed tax relief bill will cap residential property taxes at no more than 4 percent of your income for individuals who make less than $50,000 per year. While any tax relief is certainly welcome, this bill is fraught with problems -- wealthy retired individuals who earn little income yet own considerable assets will benefit from this measure, but working-class families who rent will not.

Further, there will be an incentive to transfer property to family members who earn lower incomes to avoid property taxes creating inequitable treatment. At most, this tax cap bill will offer a mere $5 million in tax relief, while the general excise tax increase will suck $150 million, or $450 per family, out of your pocketbook and the economy each year. Rather than offer a complicated tax cap, a far better solution would be to just cut taxes, or at least not raise taxes further.

The current fiscal approach at City Hall is best described as taking a dollar from you and then flipping you back a nickel. I am not opposed to giving you back a nickel, but I think it would be better to just never have taken the dollar from you in the first place.

Charles K. Djou represents Council District IV (Waikiki, East Honolulu).

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