Last week we took a look at why state government is struggling financially in these difficult economic times. We learned that while the difficult economic outlook has a hand in creating those struggles, the challenges faced by all governments are
Last week we took a look at why state government is struggling financially in these difficult economic times. We learned that while the difficult economic outlook has a hand in creating those struggles, the challenges faced by all governments are creations of their own.
Not surprisingly, it was pointed out that when revenues were plentiful, political leaders took the opportunity to take the excess cash and satisfy their constituents’ demands for more and more programs or services. After all, with cash so readily available in those good times, why not spend it to satisfy them?
The problem with that strategy is that it built goods and services more appropriately provided by the private sector into the structure of government. Having made those goods and services a part of those provided by government, the constituency came to expect government to continue to provide them even if it meant raising taxes and fees to keep them on the government menu. In some cases, constituents have come to believe they are entitled to many of these programs and services, at least until they realize how much they are paying for them.
Such is the case in public housing where, for decades, people who could not afford to compete in the open marketplace found shelter in government-provided housing. The problem is that government did little other than provide a roof over these families’ heads so that they would not be homeless. As we have all learned, there will never be enough housing for all who need transitional shelter. However, it is hard to transition families who do not have the skills to compete in the open housing marketplace.
Government has dropped the ball by not realizing that in order for families to be able to move out of public housing, they must acquire skills that will allow them to compete in the housing market. From education to financial literacy to job training, all are crucial to any family in order to survive in Hawaii. Unless vacancies can be created in public housing, those who are truly sleeping on the beaches and the sidewalks will have no place to find shelter.
Those within government, as well as those outside of it, must understand that public housing, with the exception of that provided to the aged and disabled, is transitional — temporary — housing and was never meant to be permanent. Yet, there are some families who have lived in public housing for four or five generations.
This sense of entitlement is not necessarily the province of the poor. At the other end of the spectrum are those who believe government should reward them for taking financial risks such as investing in high technology ventures or alternative energy projects. Even construction industry denizens and film producers and investors have bellied up to the bar for their service of tax incentives and tax credits which amount to nothing more than taxpayer subsidies of these particular industries and activities.
The problem with these “entitlements” is that while they are expenditures of taxpayer dollars, they are made out the “back door” where the general public does not see the direct outflow of tax dollars. Even the advocates of these subsidies argue tax credits are not expenditures if, in fact, they don’t attract these activities to Hawaii. If they do, they create economic activity and jobs that are “good” for Hawaii and its working people. The problem there is a lack of transparency about the credits. First of all, where there is no limit on the credit, the taxpaying public does not know how much is being spent making a movie or building a hotel.
As a result, taxpayers cannot evaluate the amount spent on such incentives as compared to how much is being spent on education, public safety or social services. The money is gone even before it reaches the state treasury as the credits or incentives offset liabilities of the claimant taxpayer. Can taxpayers ask, “Are these credits costing more than what it would cost to put a laptop computer in every child’s lap?”
The long and short of it is that government has grown much too large for taxpayers to be able to support and still be able to survive in this state. Hawaii certainly does not have a revenue problem. It has a spending problem that needs to be addressed and brought back in line with what the state’s economy and its people can afford.
Lowell L. Kalapa is president of the Tax Foundation of Hawaii.
