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The Honolulu Advertiser
Posted on: Sunday, April 4, 2004

COMMENTARY
A tax on businesses is a tax on you and me

By Dr. Richard R. Kelley

Sen. Russell Long, the legendary Louisiana Democrat who died about a year ago at 84, is remembered for many things, but particularly for his approach to taxation.

His famous quote ii "Don't tax you, don't tax me, tax that fellow behind the tree" ii sums up how our elected representatives try to structure taxes. Whether at the county, state or federal level, they make every effort to hide taxes and/or shift the burden from politically favored groups to those who have less clout in legislative corridors.

We have seen this recently in the Medicare Reform Act passed by Congress in 2003, which will shift hundreds of billions, if not trillions, of dollars in medical costs from today's elderly to the "fellow behind the tree," the next generation.

It's hardly a coincidence that today's seniors vote in much greater numbers than their young-adult grandchildren who will soon be paying the bill.

In Hawai'i, the "fellow behind the tree" often means businesses or visitors rather than individual residents. We see an example of that in the current session of the Legislature, which is looking to businesses to pay for a significant part of the war on crystal methamphetamine, more commonly known as ice.

Illegal drug use is a problem in Hawai'i and many other states. It is a concern for everybody, and the Legislature should be commended for confronting the ice epidemic through House Bill 2003 and Senate Bill 3233, which would provide money for a number of programs.

However, our lawmakers are hoping to shift a significant part of the cost of the battle to "that fellow behind the tree," the business community. The bills propose that employers conduct mandatory substance-abuse training and require that employers amend their health insurance coverage so that treatment for drug and alcohol abuse is given "parity" with other injuries and illnesses.

The cost of the training and associated record-keeping is hardly a small number, but it pales in comparison with the cost of health insurance parity for drug and alcohol abuse, which would be astronomical — potentially crippling to companies both large and small.

No matter what one calls these programs, their cost amounts to a tax on business.

At the same time, Honolulu is also busy trying to balance its budget. The city is short of money to pay for a number of things, so Mayor Jeremy Harris has proposed a budget that will raise property taxes and trash-disposal charges on "that fellow behind the tree," the business community.

He is calling for a 7 percent increase in property-tax rates on most nonresidential properties and a doubling of the fees for commercial trash haulers. Residential property taxes and garbage collection charges will remain untouched.

Unfortunately, few people understand that in the end, businesses do not actually pay taxes. They merely collect them from their customers on behalf of the government. It is individuals who end up paying taxes levied on business as part of the price they pay for the goods and services they purchase.

There is no question that the problem of illegal drugs in Hawai'i is significant, and that the city has real financial problems. However, if the solutions really do require higher taxes at either the state or city levels, our elected representatives should raise the rates equitably for all and not just for businesses.

Not only would it be the open, honest and fair way to pay for what we need, it would do the least damage to our economy — to our people — because it would have a smaller effect on the competitiveness of Hawai'i's businesses.

Dr. Richard R. Kelley is chairman of Outrigger Enterprises Inc.