Launching an Annual Attack on the Wealthy
Occasionally, lawmakers in the square building on Beretania Street come up with an idea that hasn’t been tried here before to see whether it sticks to the wall. This year, one of those ideas is a “wealth tax.” It’s currently in Senate Bill 3182, and Senate Bill 3250 would form a working group to study imposition of a wealth tax. What’s the difference between a wealth tax and the income tax that most of us are more familiar with? Income tax is imposed when you make money but it doesn’t apply when you simply hold on to it. Wealth tax, like real property tax, is imposed every year on the wealth that you do have. The current wealth tax proposal would impose a 1% tax on the state net worth of any individual who holds $20 million or more in assets in the State. (This, by the way, might not be a problem only for the ultra-wealthy. If the tax isn’t producing what lawmakers want, there is always the prospect that future legislatures will drop the threshold so that it bites more people.) With the current tax proposal, practical difficulties abound. One of them is figuring out what is an asset in the State (as opposed to somewhere else). With real property and physical objects, that determination is relatively easy. Where it gets tough is when the assets are intangible. Suppose a taxpayer has stocks and bonds in various companies, some located in Hawaii, some entirely out of state, some foreign. Even bank accounts can pose difficulties – suppose the taxpayer lives here but the bank is located in North Carolina. Then what? Another difficulty is determining how much some of these properties are worth. Bank accounts, publicly traded stocks, and such things as commodity futures might not pose that much of a problem because the markets come up with a price for them every day. Maybe those owning real property could use the valuation numbers that the county in which the property sits comes up with. But what about shares in a closely held business? Art and collectibles (yes, even that PG 1/60 RX-78-2 Gundam Gold Version)? And even the family car? Taxpayers exposed to a wealth tax need to value their property every year, not just at date of death for estate tax purposes. Why impose a wealth tax? It’s unclear who’s behind the one we have here, but wealth taxes have been proposed elsewhere – California, for instance – and its teachers’ union came out to support it. “California billionaires have increased their wealth astronomically since the beginning of the pandemic, while regular working families have struggled to pay their bills,” their union president said in a statement. “It’s time we took care of each other, and not just watch billionaires fly into space.” It’s unclear whether the teachers’ union here in Hawaii is thinking the same thing, although a couple of local teachers did submit testimony in support of the wealth tax bill. California’s wealth tax had its opponents as well. The California Taxpayers Association, California’s counterpart to the Tax Foundation of Hawaii, stated, “Last year’s version of the wealth tax led many Californians to rethink living in California, just by virtue of being introduced. In the last year, these taxpayers sought out legal advice, hired tax experts who specialize in residency issues, and seriously reconsidered their future in California. … If high earners leave – and they will, to avoid the tax hike as well as the headache of having to annually appraise everything they own, anywhere in the world – the taxpayers left in California will be asked to pay more.” Will the same issues play out here in Hawaii the same way? As the Grassroot Institute points out, we’re already losing people – 32,237 since fiscal 2016, and the top 1% of Hawaii’s income earners already pay 23% of all income taxes. If enough of those folks jump on planes as well, we will be seriously hurting for revenue…meaning lawmakers may well look to the rest of us to make up the difference.
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WHY IS HAWAII SO EXPENSIVE? THE WMTA AGREES WITH CONCLUSIONS CONTAINED IN THIS ENLIGHTENING RESOURCE AND SUPPORTS THE GRASSROOT INSTITUTE WITH APPRECIATION: "Hawaii residents enjoy one of the most beautiful places on earth to live, but they pay a high price to do so. How high is the “price of paradise”?
Institute Marketing Director Josh Mason sums it up the issue succinctly in his aptly titled new article, "Why is Hawaii so expensive?" Accompanied by a David Swann cartoon that is as relevant now as when Swann produced it four years ago, Mason's article boils it down to three main factors: >> High taxes. >> Land-use and zoning regulations that make housing unaffordable. >> The Jones Act, which increases shipping costs to, from and between the islands. His conclusion: "Sure, there is a price to pay for living in the most isolated islands in the world, but state, county and federal government policies increase the price even further. "Hawaii would be better off if lawmakers would remove the barriers that prevent entrepreneurs and citizens from freely exchanging goods and services and solving the state’s problems. Then perhaps people would not be priced out of paradise." Read the entire article, with all the facts and figures, here. We Have a Health Care Crisis – And Our Taxes Aren’t Helping We have a health care crisis on our hands. According to a study by the University of Hawaii School of Medicine, there is a shortage of physicians in Hawaii. The school has forecasted that the gap between supply and demand is now close to 1,000 doctors, and it has been getting worse over the years. Source: University of Hawaii, John A. Burns School of Medicine.
This shows a problem, although highlighted by the recent pandemic, that has been years in the making. According to reporting by the Grassroot Institute of Hawaii, Hawaii’s healthcare crisis includes a growing doctor shortage, lack of specialty care in rural areas, high emergency room wait times and the fact that we have among the fewest hospital beds per capita in the nation. Its causes include a low Medicare reimbursement rate, General Excise Tax (GET) applying to medical practices, and our sky-high cost of living. Medicare, for example, is supposed to pay for health care for seniors that need it. Medicare will only reimburse medical work at “reasonable charges” and will not reimburse the doctors for the GET they have to pay. Doctors usually wind up absorbing the tax rather than attempting to surcharge their patients for it, meaning they have to account for yet another expense amidst Hawaii’s high cost of everything. In our current legislative session, there is a bill (HB 1407 / SB 2020) to disallow the wholesale GET rate of 0.5% on a sale unless there is a resale at the retail 4% rate that follows it. The Department of Taxation testified strongly in favor of it, while different hospitals and health care organizations testified it would be a disaster for them. The House committee hearing it advanced the bill forward, while the Senate Ways and Means Committee deferred it. The fate of the bill is uncertain at this point. There may be people out there thinking that, well, doctors are rich fat cats, so why shouldn’t we tax them up the wazoo? The short answer to that question is that they are going to jump on a plane and get the heck out of here – which is backed up by the statistics discussed earlier in this article. Then, of course, they won’t be around when you need them. And we need them. Wouldn’t you say so, legislators? |
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