One-fifth of working
day goes to taxes

Tax Foundation study of the
'Aloha' family breaks down income

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By Russ Lynch
rlynch@starbulletin.com

Income earners in a typical Hawaii family use 20 percent of their working hours to generate enough money to pay federal, state and local taxes, according to a new study by the Hawaii Tax Foundation.

One hour and 36 minutes of every work day goes into earning enough to pay direct taxes on income and taxes on the goods and services family members buy and another 59 minutes goes into indirect taxes, which are hidden in prices paid for goods and services.

That doesn't include taxes their employers have to pay on their behalf.

"You look at the clock and it tells you we spend nearly a third of our pay working for the government," said Lowell Kalapa, Tax Foundation director.

"That's quite a bit going into taxes and it doesn't leave us a lot left for the necessities such as food and shelter and very little left for recreation," he said. That's why taxpayers have to keep a close eye on how government agencies spend their money, Kalapa said.

The nonprofit foundation studied its new theoretical family, "Alfie and Anita Aloha" and their two children. After more than 30 years watching the fictional Arnie and Annette Aloha, the Tax Foundation this year retired them and updated its annual study to look at their son Alfie, his wife Anita, and their two, the grandchildren of the original Aloha couple.

It's a modern family. Anita is a computer programmer. Alfie is a manager in an automobile service center and has a part-time job to help pay for extras, such as private school tuition for the kids. They managed to put some money into investments, such as a rental apartment.

Their total annual income is $81,000 in salaries and $1,840 from other sources, such as rent from the condominium after expenses. That puts the family in a much higher income bracket than the Hawaii average.

"However, they were representative of many working families in the state, many of whom work more than one job," says the foundation's new brochure, "The Tax Burden of the Aloha Family."

The bottom line: Alfie and his family pay $19,288 directly to the tax collectors each year. Indirectly, they are responsible for the generation of another $11,819 paid through excise taxes -- charges built into their purchases and paid by the businesses that sold them goods and services -- and other taxes paid by their employers and others in the normal course of a working life.

One example is their employers' share of Social Security taxes. The Aloha family pays $6,179 a year and their employers pay $6,179. "While this amount is not received as income by the Alohas, it nevertheless represents roughly 11 percent of the income they did receive," the Tax Foundation brochure says.

The foundation views taxes paid by employers as part of the overall compensation package, money that would go to the workers in some form if government agencies didn't grab it.

The report is available for free by sending a self-addressed, stamped envelope to the Tax Foundation of Hawaii, 326 Queen St., Suite 304, Honolulu, 96813. Multiple copies are available at 15 cents each for members of the foundation or 30 cents for non-members. For more information, call the foundation at 536-4587.

Paying the bills Where an eight-hour day of work goes for the Tax Foundation's fictional Aloha family: Time Pays for 1:36 Direct taxes 0:59 Indirect taxes 2:03 Housing 0:51 Food 0:16 Clothing 0:45 Transportation 0:17 Health 0:18 Recreation 0:55 All other