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Our forebears paid more taxes in tough times — so should we


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POSTED: Sunday, April 05, 2009

The global economic crisis is having a severe impact on government revenues at all levels. Hawaii is no exception, except that the impact on government revenues here might be deeper and longer lasting than in most instances because our major industry is tourism, and more so because our reputation is in luxury tourism. Tourism, especially luxury tourism, is one of the first items to be cut from family budgets and even from the budgets of businesses and government, and is among the last cuts to be restored. Travel to places like Hawaii by government officials gets labeled as junkets, for example.

Spending patterns are changing from consumer spending to savings. Americans are driving less, eating out less, going to the movies less. Frugality is in, free spending is out.

Realistically, Hawaii should be prepared for long-term loss of government revenue if current rates of taxation remain in place. Critical education, social and health services are being hammered. Our most vulnerable people are suffering Our quality of life is suffering.

But if we are willing, as a nation and state, to return temporarily to tax rates that our parents and grandparents endured in the 1960s and 1970s, we will be OK.

The top federal income taxes then were in the 60 percent range, not the 35 percent of today. The top state income tax rate during that time was 11 percent, not the 8.5 percent of today. We would not have to come near the top rates that America's “;greatest generation”; paid in the 1930s through 1950s, which were draconian at 90 percent or more. This latter was to pay for the Depression-era programs, World War II and the early years of the Cold War. Our sacrifices today to take care of our people are small compared to what that generation and those that followed made. As a people, we have forgotten the huge financial sacrifices made by our parents, grandparents and great-grandparents.

The sacrifices we are called upon to make for our children, grandchildren and great-grandchildren are small in comparison. Raising the top income tax rates into the low 40s (they were at 39 percent under President Bill Clinton) and to 10 percent for Hawaii, as they were under Gov. John Waihee and Gov. Ben Cayetano, could bring us through this rough period.

An alternative for Hawaii would be to raise the general excise tax by a certain amount, combined with the tax credits for food, shelter and health care. Each percent of the GET raises nearly $400 million.

While it is conventional wisdom to say that taxes shouldn't be raised in bad economic times, upon closer examination, they are about the only times to raise them. When times are good, there is no need for them to be raised. Good times are times to save for the rainy day fund.

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Rev. Bob Nakata is pastor of Kahaluu United Methodist Church and a former state senator.