Monday, February 5, 2001
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Posted on: Monday, February 5, 2001

Island Voices
Why cut in excise tax makes sense

By Charles K. Djou
Republican who represents the 47th District (Kahalu'u, Kane'ohe) in the state House

Although the governor and the editors of this newspaper oppose it, a cut in the general excise tax makes good sense:

Cutting taxes stimulates the economy. In the early 1990s, when the state economy began stagnating, Hawaii’s Republican legislators argued for a cut in taxes. After prolonged foot-dragging, the Legislature finally cut taxes in 1998. As a result, we now see improvement in our economy.

A tax cut protects Hawaii against another recession. In 1991, the national economy plunged into recession, causing Hawaii to follow. But, unlike the national economy, Hawaii took nearly a decade to recover. Today, the national economy is showing signs of slowing just as Hawaii’s economy is beginning to recover. Our state must take a proactive approach and head off an economic decline before it happens.

The GET is unfair. The poor pay a greater portion of their income to cover the GET than the wealthy do.

Cutting the GET helps small business and will do more to help change the image of Hawaii as an unattractive place to do business.

Hawaii’s income tax is deductible in calculating federal income tax, while the GET is not, and thus it makes more sense to cut the GET than granting tax credits or deductions.

Cutting the GET would put funds back into the local economy immediately and thus help protect against a recession. Tax credits or deductions, in contrast, would take at least a year to show a demonstrable effect.

How can we pay for the GET tax cut?

Economic growth. Empirical evidence shows that cutting taxes stimulates economic growth. That economic growth in turn actually increases government revenues. This growth is demonstrated by the increase in government revenues following the 1998 tax cut.

Civil service reform. Hawaii has one of the largest and most expensive state governments in the nation. By passing comprehensive civil service reform, as suggested by the governor, we can reduce the cost of state government and cover any tax cut.

Attrition. Some 1,600 state workers retire or leave state government voluntarily every year. By not filling those vacant positions, the state would save more than enough funds to pay for a GET cut.

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