Honolulu Advertiser Second Opinion column by Cliff Slater

May 6, 2002


Tax Foundation needs help

The independent organization has been the conscience of the state on tax policy, but now it's endangered.

The trusted phrase “According to the Tax Foundation ... ” is one that for years we have all been reliant on for believable government data. However, it is a phrase that this community is in danger of losing unless the Foundation gets more support.

The Tax Foundation is an independent organization, which has prohibited itself from accepting government funds to maintain its independence. Instead, 211 concerned individuals and independent businesses fund its mission to foster “an equitable tax system” and to help legislators, the public and the media understand the ramifications of present and proposed tax law.

One business wants homeowners to get a tax credit for installing hurricane proofing. Someone else wants a tax credit for installing solar water heaters. The construction industry want tax credits to stimulate work for its employees.

At first glance these tax credits—a recent phenomenon—are all quite plausible, but they are social engineering, not sound tax practice.

For example, while artificially stimulating the construction of hotels and office buildings may sound plausible at first, it distorts our economy. Honolulu is already overbuilt; rents—a sure indicator—are lower everywhere than they were twelve years ago.

One can make a case for giving tax credits for all manner of things but the fact is that if the project for which the tax credit is requested does not otherwise make economic sense then we are taking tax money out the economy, at the general expense of projects that do make sense.

In any case, the Tax Foundation cannot consistently argue with legislators for taxes that are even-handed and then not object when an individual or a business wants special favors for itself—or its industry—no matter how plausible its case.

The Tax Foundation’s position has been quite simply that there should be either tax credits for everyone or tax credits for no one—except certain low-income earners.

Then there are those who, for seemingly the most laudable of reasons, wish to raise taxes or—same thing—raise fees. The Foundation consistently opposes tax increases and especially new ones.

The Tax Foundation for its entire existence over the last 45 years has argued that:

  • Hawaii’s state and local taxes should be closer to the national average for all states instead of being 21% higher.
  • Hawaii’s taxes need to be reduced across the board—not to this week’s favored group, let alone individuals.

The Foundation believes that sound tax practice is good for everyone in the community and to be credible with legislators and the public in that effort it must be consistently principled in what it advocates.

But let a Waikiki hotel get aggravated because it wanted a special tax credit that the Foundation opposed and they will be sure to forget the many times that the Foundation has testified that hotels are burdened with excessive property taxes.

Let the Democrats find fault with the Tax Foundation’s recommendations and they will forget that the Foundation criticized the Republicans for wanting to reduce taxes without introducing legislation that would cut government spending by a like amount.

Let one businessperson be aggravated that the Foundation opposed their pet project and they will forget that the Foundation fought other businesses wanting to raise the G.E. tax for their pet projects.

The Foundation is one institution in Hawaii that can really be trusted by the legislature, the media and the general public for the data it presents and the evenhanded positions it takes.

It is time that everyone got behind the Tax Foundation to prevent its demise.

Cliff Slater is a Director of the Tax Foundation and a regular columnist. His footnoted columns are available at www.lava.net/cslater