Leave tax policy alone


POSTED: Tuesday, November 10, 2009

Hawaii legislators are under pressure by the state's powerful public employee unions to increase taxes to shield their members from pay reductions that are plaguing the private sector. Hiking the general excise tax is not a solution—it would raise retail prices of goods and services that have become unaffordable for many during the recession.

State employee unions have refused to accept any reduction in hourly wages, instead accepting labor contracts that include furloughs—days off without pay. The United Public Workers, the union of blue-collar state employees, has yet to approve even that partial remedy to the state's budget crisis.

Most residents understand the consequences of increasing the state's general excise tax—a tax at multiple levels—and so do some legislators.

“;I don't want to raise taxes because it will be so counterproductive,”; House Speaker Calvin Say told the Star-Bulletin's Richard Borreca. “;People may not buy anything but the basics.”;

Say suggests that the state may need to take revenue from the hotel room tax from the counties and take back a share of the excise tax collected in Honolulu that now goes to the rail project. Grabbing the hotel tax dollars from the counties would merely shift the revenue of that tax, increased from 7.25 percent to 8.25 percent this year, from one level of government to the other. Withholding excise tax revenue from rail transit could have dire consequences for a transportation project badly needed to stem traffic congestion.

One method of cutting state expenses would be to adopt a mandatory 10-hours-a-day, four-day work week, a system successfully implemented in Utah in August 2008 and tried out in Hawaii late last year, with good results. Sixty percent of the Utah city employees who preceded state employees working under that system reported higher productivity and improvement of citizen access under the system.

A Utah state official has said that the four-day work week resulted in a savings of $700,000 a year in energy and janitorial costs, less than projections based on high gas prices and utility rates, which have fallen. It also may have contributed to reducing more than $4 million in overtime payments.

After a three-month experiment in Hawaii last year, the Hawaii Government Employees Association appears to have balked at making it permanent, although it is allowed by the labor contract. A union leader pointed to problems of members finding adult day care and working around a second job.

While the Utah savings are a small fraction of the $1 billion needed by fiscal 2013 to balance the Hawaii budget, it is a workable piece toward a collective solution. Instead, today's stalemate seems to exemplify the lack of flexibility in dealing with the recession.

Increasing taxes or diverting tax revenue are simplistic and unacceptable alternatives while non-government workers struggle to make ends meet.