StarBulletin.com

Tax hike not the solution


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POSTED: Sunday, January 31, 2010

After the national recession came to Hawaii's shores, the Legislature last year raised income taxes on the state's top wage earners to the highest level in the nation, overriding Gov. Linda Lingle's veto. The teachers union now wants the Legislature to increase the rates even more so its members can avoid the pain being experienced in the private sector. Legislators should reject such a money grab.

The Hawaii State Teachers Association is asking for an income tax hike for residents making more than $200,000 a year. Combined with other proposals to increase capital gains and corporate taxes, it would provide more than $500 million in additional revenue annually, according to the union.

People making that amount may seem to be the state's filthy rich. Legislators accepted that view in last year's session when they increased the income tax by as much as one-third—from 9 percent to 11 percent, kicking in at $300,000 for a couple and $150,000 for a single, and a 10 percent rate for wages of at least $350,000 and $175,000.

The teachers now propose that the rates be increased to 10.55 percent for those making $200,000 to $400,0000, and 12.85 percent for those earning more than that. Legislators should reject the proposal for the same reasons Lingle gave for vetoing last year's tax increases. The reasons are even more valid today.

“;Although there is the misconception that only wealthy people will be affected,”; Lingle explained in her veto message, “;this bill will adversely impact almost 37,000 persons, of which about 27,000 are sole proprietors, partnerships or subchapter 'S' corporations whose owners report their business income through personal income tax returns. ... This could mean more business closures, layoffs and fewer job opportunities.”;

Lowell Kalapa, president of the Tax Foundation of Hawaii, said a further income tax hike on the wealthy today would “;drive them out of the state ... When we lose all of the people who have the money to start our businesses, what are they (teachers) going to say to their students when there are no jobs?”;

Jim Williams, the teachers union's interim executive director, has made clear that he has no concern about business and job losses in the private sector, as long as teachers are made immune from wage reductions.

“;If they're not going to be paid, then there has to be an adjustment in their workload,”; he told the Star-Bulletin's Christine Donnelly, “;and that's where the furloughs came from.”; The Furlough Fridays agreement assures teachers that they continue to receive the same hourly pay but just work fewer hours. Such a deal in the private sector would be deemed preposterous.

Williams said teachers have been “;victims”; of the recession. To the extent that they are working fewer hours, they are bringing home less in wages because of the furloughs, but that pales in comparison with the recession's damage incurred by many other residents—especially those with no wages because of lost jobs.