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Figuring fair taxes not as simple as it sounds

Updated: 
June 10, 2017 - 10:55am

Don’t tax you. Don’t tax me. Tax that fellow behind the tree. Russel B. Long, probably.

The history of taxation is a history of unfairness. There has probably never been or ever will be a fair tax. What can we do? It sounds fair to tax everyone their portion of the county budget. The $500 million county budget divided by 200,000 people comes to $2,500 each. Some families could not pay that if you took everything they own.

To add to unfairness state law limits a county to a few sources. Property tax, GET (sales tax), fuel tax, TAT (transient accommodations tax).

Money is like manure. If you spread it around it does a lot of good. But if you pile it up in one place it stinks like hell — Clint Jr. Murchison.

I sweated my way through “Capital in the Twenty-First Century” by Thomas Piketty, gave up halfway, but tried again when I learned that it included recommendations. The most constructive form of taxation is one that limits the gross accumulation of wealth.

One way the county can do that is property tax, but that has problems. To determine the tax one needs to value the property. We could tax all land at the same rate, but obviously some land like beachfront is worth much more than other, like mauka desert. It does at least aim at the accumulation of wealth, but can fall particularly hard on farmers because they need a lot of real property i.e. land, to be viable. Property tax also discourages the preservation of natural features that pay tax, but provide no income to the owner. There are exceptions granted for things like hospitals, schools and houses of worship. There is the tax windfall when the neighbor’s farm turns into a shopping center and adjacent land suddenly has a higher appraisal. So that which sounds simple gets complicated. Thus value based on similar property sales may be the best we can do.

GET: Just an insidious and vastly complicated sales tax that puts the government finger in every single transaction. The county is allowed to add a surcharge which adds complexity but raises little additional revenue. Like all sales based taxes it falls hardest on those with the least ability to pay or avoid and puts an accounting burden on small business.

Fuel tax: Sounds equitable, but on Hawaii the most common fuel purchase is gasoline. Who purchases the most? Low paid workers who live in Ka’u or Puna and commute 80 miles a day in an old car that gets 12 mpg. Maybe the fuel tax could be lower in Ka’u and Puna.

TAT: This was supposed to be shared with the counties, but the state keeps taking a bigger bite, because they can. Of course the state and Honolulu County are almost inseparable. So essentially Honolulu gets the governor’s four votes, making five votes total, and the other three counties get one vote each.

No one likes to pay taxes, but many of us don’t mind too much if we feel the rate is fair. What is fair?

First, the rate for an individual, family or business should not cause hardship or deprivation. Like the federal income tax, progressive with an exemption so that low income people don’t have to starve to pay their tax. They still pay plenty of other taxes indirectly because taxes are built into everything that they buy.

At the other end of the scale are the truly wealthy. It would take an extremely high tax rate to cause them to actually suffer, unless you think doing without champagne Popsicles, a 100-foot yacht and two villas in the south of France as suffering. Can property tax be progressive with rates that rise along with increasing valuation? Rate times value to the 1.02 power.

Ken Obenski is a forensic engineer, now safety and freedom advocate in South Kona. He writes a semi-monthly column for West Hawaii Today. Email obenskik@gmail.com

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