HSTA proposes tax increase

The Hawaii State Teachers Association is proposing to increase taxes on upper-income residents to eliminate Furlough Fridays and provide support for public education.

The teachers union planned to introduce legislation yesterday to create two new higher tax brackets for Hawaii residents making more than $200,000 a year. Combined with other proposals that would increase capital gains and corporate taxes, the state would see more than $500 million in additional revenue each year, the HSTA estimates.

"There's no good solution to furloughs, either this year or next year, without additional funding for the Department of Education. And the only way to do that is to increase revenues," said Jim Williams, executive director of the HSTA, which represents about 13,000 public school teachers and librarians.

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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?"

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With regard to the tax question, the Star-Bulletin may be on the side of the well-to-do, but it is on the wrong side from an economic perspective. While the Tax Foundation of Hawaii provides a useful service, we expect Lowell Kalapa (its president) to oppose most tax proposals. That's his mission. That's why the Tax Foundation membership funding comes almost exclusively from businesses and affluent individuals.

If you want to get an economic analysis, ask an economist, not Mr. Kalapa. Carl Bonham, a member of the State Council on Revenues and an economist with the University of Hawaii Economic Research Organization, recently noted that we are not going to cut our way out of the state's budget deficit.

We believe the HSTA proposal can make a significant difference in generating revenue needed to address Hawaii's shortfalls and thereby enable our state to maintain vital services.

The proposal by the HSTA seeks to do this in the most responsible and effective way, not by making the wealthy bear a heavier burden than others, but by asking them to do their fair share. After all, Hawaii tax laws and government incentives are largely designed to support and encourage these individuals and the businesses they own. Consequently, they have the smallest tax burden of any income group at present.

-- Wil Okabe, president of the Hawaii State Teachers Association.