Census ratings unfairly portray Hawaii tax bills

THE ISSUE The Census Bureau says Hawaii taxpayers' average annual bill is the highest in the nation.

HAWAII taxpayers cringe every year upon being told by the U.S. Census Bureau that their tax bill is among the nation's highest. Defenders of the state tax system must point out annually that Hawaii is the only state that operates elementary and secondary schools, the responsibility and cost of counties in other states. Hawaii might indeed be Tax Hell, but it's not as hot as indicated by the bureau.

According to the Census Bureau, Hawaii taxpayers forked over a nation-topping average of $3,050 in 2004 in state taxes, compared with the national average of $2,026. When federal subsidies, service charges and miscellaneous assessments are added, the state's revenue per capita totals $5,290, compared with states' per-capita intake of $4,085 nationally.

Nearly two-thirds of Hawaii's tax revenue came from the broad area described by the bureau as sales taxes. Those include Hawaii's excise and hotel room taxes, with income taxes accounting for less than a third. The remainder came from license fees and other taxes.

Visitors to the islands pay much of the excise taxes, so that share of residents' tax burden can be regarded as inflated by the bureau's statistics. A surging tourism industry presumably provides an even greater lift than that indicated by the 2004 figures.

Although counties in other states run the school systems, the education portion of the state bill nationally for the average taxpayer came to $1,465, spent on state universities or funneled to the counties. According to 2001-'02 Census Bureau statistics, counties spent $407 billion on elementary and secondary education while states chipped in $4 billion.

In Hawaii, an average of $1,971 of the taxpayer's money -- $556 more than the national figure -- went to education from the elementary to university level in 2004, according to the bureau.

The National Association of Counties reports that its members, which derive more than 30 percent of their revenue from property taxes, devote 14 percent of their budget to education. Because schools are not a county budget item in Hawaii, it is fair to subtract the difference between Hawaii and other states' average expenditures on education in order to arrive at a comparison.

Is Hawaii actually Tax Heaven? Of course not. After subtracting the $556 from the average island taxpayer's bill, Hawaii's would rank seventh-highest in the nation. Tax Hell to the utmost would be coal-, oil- and natural gas-rich Wyoming, which has no income tax -- but that's another story requiring further adjustment.