Think Inc.
A forum for Hawaii's
business community to discuss
current events and issues

Measuring up

A small tax base and finite
amount of land make it tough
for Hawaii to afford itself

By Stephany Sofos


As almost everyone understands, the economy in Hawaii is based mainly of two things, tourism and real estate. Tourism provides the quick everyday money for our daily income streams, both private and public. Real estate is our long term income source, as everyone wants to own a piece of paradise.

Both of these "commodities" generate tremendous revenue for state government and major landowners. Knowing this is pivotal in understanding how our state works.

So, why is our state struggling economically? Many reasons exist, but the two main ones are we have a small tax base and a finite amount of land available for development and enterprise.

Currently we have a resident population of approximately 1.2 million people. It is one of the oldest in the nation and aging daily with an influx of middle-aged people and retirees. We do not tax our seniors' retirement pensions, but they use the parks, beaches and infrastructure with relatively low costs to them.

Combine this with our service-based economy -- with the majority of jobs coming from tourism, retail and government, none of which traditionally pay high wages -- and our tax base becomes almost nonexistent.

In addition, approximately 92 percent of all Hawaii lands are controlled by approximately 28 entities, including the federal, state and county governments. Much of this land is zoned for conservation or agricultural use, primarily because to convert it into residential or commercial use would increase land values and mean higher taxes for major landowners and more detailed scrutiny by the government and outsiders.

We have nearly 7 million visitors coming into Hawaii per year. They are taxed up the nose for our sunshine and surf, but that still fails to provide enough revenue for all the services and jobs our state and counties governments provide to us.

With a small tax base, valuable land in holding patterns and not enough tourism to pay for government, you can see why we are broke.

So now the questions are: Does government shut down programs like libraries or public swimming pools? Does it cut bodies knowing there would not be enough private sector opportunities for these displaced workers? Does state government force rezoning of land to increase taxes, thereby creating new revenue sources?

If lands are rezoned, will landowners be pressured to build new commercial and residential projects to balance their costs and taxes? Will this new development put pressure on government to allow forms of gambling to come into our islands? Will all this new development lower the costs of housing and the ability to do business here because there will be more opportunity for entrepreneurship?

Moving forward on any of these questions would mean permanent change in the fabric of our state. Would we be able to sustain the quality of life here?

So many questions for our politicians to ponder, but I can tell you from my observations, Hawaii is gaining in residents who want to live here but don't want, or need, to work here.

I believe as business people, politicians and educators we need to be courageous in our thinking about restructuring growth. We need to see how we can rebuild our state with the people and businesses we have here now, as well as the new ones who wish to come into our islands. We need to be bold to grow ourselves for our future, yet sustain and preserve our past.

Stephany L. Sofos is a real estate consultant and a licensed broker and appraiser. She can be reached at

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