Gathering Place
Don Newman
What President Bush’s
tax cuts mean for HawaiiMembers of Hawaii's congressional delegation delight in issuing press releases that extol the amount of federal money they bring to the state. "$20 million for Hawaii ferryboat," "$11 million for Honolulu Bus Rapid Transit" and "$1 million for Hawaii fisheries development program" are typical offerings. Of course, securing Uncle Sam's dollars for the folks back home is a time-honored tradition that dates to the earliest days of the republic.
But what if there was a federal program that delivered billions of dollars to Hawaii, with $43 million in the next three months alone? An obvious "yes" vote for any Hawaii member of Congress, right? Wrong. Congress held such a vote in May and Hawaii's solidly Democratic delegation all voted against it. What is the program? It is President Bush's tax cut, which goes by the tongue-twisting title of the "Jobs and Growth Tax Relief Reconciliation Act of 2003." The president signed the bill on May 28.
The $43 million comes from just one provision of the new law, increasing the Child Tax Credit from $600 to $1,000 per child. On July 25, the Internal Revenue Service will begin mailing checks of up to $400 per qualifying child to 108,000 families in our state. Nationwide, 25 million families will receive checks. Unlike other federal money that has poured into our state, this is not a handout. Recipients merely will be getting back their own money.
The bill contains further provisions that will help Hawaii's people: 155,000 married couples will benefit from the reduction in the marriage penalty; 110,000 taxpayers will see a reduction in the double taxation of their dividend income; 317,000 residents will benefit from the expansion of the 10 percent tax bracket; and 111,000 will gain from the across-the-board reduction in higher tax rates. Many will see their federal income tax obligation reduced to zero. Some 3 million people nationwide will be removed from the tax rolls.
There are several policy advantages to allowing people to keep more of their own money. Cutting tax rates is efficient. The same money doesn't have to be carried in a leaky bucket all the way to the nation's capital and back again. It is fair. Money from tax cuts goes directly to the people who earned it in the first place. It is responsible. Limiting the tax burden disciplines our elected representatives to set clear spending priorities and pay only for things that truly serve the public interest.
Overall, the economic boost Hawaii will receive under a policy of tax cuts is a vastly greater stimulus to jobs, growth and investment than anything that could be gained through traditional government spending on targeted local projects. Unlike federal grants that last one year, reducing the tax burden will benefit the people of Hawaii for years to come. Now that's worth a press release.
Don Newman is policy analyst for the Grassroot Institute of Hawaii, Inc.