Zenith of ignorance reached in legislative arena

Perhaps it is the fiscal crisis facing the state, but it is more apparent this year that there is a lot of ignorance about just what makes the economy run.

The other day the house committee on economic development heard a slew of bills that would offer tax credits for this and that, but one of the measures would offer a tax credit for hotel renovation and construction. Citing an interim task force on construction that recommended such a proposal, nearly everyone on the committee enthusiastically endorsed the idea. After all, the construction industry has taken a hard hit with many on the bench and standing in unemployment lines. What elected official wouldn’t want to curry the favor of the labor unions and the trades people?

The problem is what most people who understand the economy know and that is that a tax credit from government is just not going to create those construction jobs. The real culprit of the mired construction scene is the fact that the credit markets are frozen and those who may want to undertake a major construction project just cannot access the money to start or keep a project going. Until those credit markets begin to thaw and money begins to flow again, no amount of state tax incentives is going to jump start construction in Hawai‘i.

The other point those committee members chose to ignore in approving to move the proposal onward is the fact that any claim of the tax credit means there are less revenues coming into the state treasury to pay for everything from furlough Fridays to social services and health care for the poor. Somehow legislators seem to think because tax credits are not in the state budget that they are free money or phantom dollars that really don’t exist. Unfortunately, those tax credits either mean the taxpayer eligible to claim the credit pays less in state income taxes or, if the credit is refundable, gets a check from state government if the credit is more than the taxpayer’s liability.

Ignorance is not meant to be derogatory in this case, but a reflection of sheer lack of awareness of the bigger picture which this year is the state’s fiscal crisis. Lawmakers either don’t realize the magnitude of the problem or perhaps intentionally want to avoid dealing with the issue and would rather like to turn their fancy to other more “important” issues. For example, early in the session one legislator proposed solving the childhood obesity problem by imposing a stiff tax on soft drinks to deter youngsters from consuming too much pound-packing brew. As one proponent legislator noted, it would raise some additional revenue.

So was it really a proposal to address obese children or an underhanded way to raise more money for the state? And did anyone consider that part of the problem is that kids are either addicted to sitting front of the tube or gazing at the computer screen and don’t get the kind of exercise they need? And how about that higher price of the soft drink? Did anyone ask what happens when a person who craves something but can’t afford it? What will they do to get that substance? Will bullying incidents grow while burglary statistics climb? Though well-intended, one has to ask about the downside of any proposal and certainly there is a downside    to this proposal.

Again, instead of focusing on the greater problems facing the state, lawmakers would rather spend their time twiddling their thumbs while Hawai‘i burns. Take, for example, that despite the growing furor over furlough Fridays in the schools, what is the first piece of education legislation to gain the approval of the State House? It is the banning of ice cream sales on school campuses.

Not that ignorance is the sole province of legislators. It can also be found in the public where individuals can be obsessed with their own issues at the expense of the larger picture. For example, irate parents ranted and raved at lawmakers for their reticence of using $50 million from the “rainy day fund” to restore those classroom days. What parents learned the other day is that the tab to erase all furlough Fridays doesn’t stop at $50 million, but it will require another $85 million from “somewhere.”

The fact of the matter is the leadership of the teachers union will not accept anything short of keeping the teachers “whole.” That translates into we don’t care if others have to take pay cuts or taxpayers will have to pay more in increased taxes, teachers refuse to take a pay cut. Unfortunately, the parents have bought into this idea as the only solution. Of course, in this economy that can not be the only solution.

Everyone is hurting and ignorance is no excuse to ignore the larger picture.

• Lowell Kalapa is president of the Tax Foundation of Hawai‘i, a private, nonprofit, non-partisan, educational organization established to research issues confronting governments in the area of public finance, taxation, and public administration. It is supported entirely by private contributions.