Posted on: Monday, May 24, 2004

EDITORIAL
Statistics can distort Hawai'i's tax picture

Here we go again.

Once again, another national report has come out that makes Hawai'i look — as some have described it — like a "tax hell."

The latest survey, according to Bruce Dunford of the Associated Press, comes from the U.S. Census Bureau.

Dunford was careful to quote state Sen. Sam Slom, one of the strongest anti-tax voices in the Legislature, who pointed out that tax statistics in Hawai'i are distorted by the fact that the state handles so many functions that in other states are distributed locally.

Think schools, hospitals, welfare and other services that are uniquely centralized in Hawai'i. Of course that requires a heavy state tax burden.

By contrast, Hawai'i's property taxes are relatively low, a reflection that we do not support public education through property taxes, as is the case in most Mainland jurisdictions.

So when one reads that Hawai'i residents pay the most per person in state taxes of any citizen in the nation, that information must be put into context.

There is another angle in the Hawai'i tax situation that creates a distorted picture. The state is heavily dependent on our general excise tax. Indeed, more than half of the overall tax income comes from the general excise and related use tax.

And about 20 percent of those excise taxes are paid by tourists, "exported" in other words, but the collections are added to the per-capita burden on residents.

It's legitimate to debate whether Hawai'i residents are over-taxed or that the state government is larger than the economy can comfortably support.

But that debate is not helped by statistical comparisons that have little relevance to the reality on the ground.