Hawaii already punishes our poor people too much. We extract more sales tax from our low-income residents than any other state and now the Legislature is considering making this disgraceful situation worse.

Look at the numbers. Hawaii’s poorest 20 percent pay 11 percent of their income in excise taxes which represents 80 percent of their total tax bill, highest in the nation. Compare this to our richest 20 percent who spend about 3 percent of their income as excise taxes.

We all know that consumption taxes are extremely regressive, and this is doubly painful here with the nation’s highest cost of living. Hawaii’s unfair tax system is a product of the state Legislature, so they should be trying to fix it instead of making it worse.

Vehicles head down Kualakai Parkway near Kapolei with concrete rail (foundations) in the background.  Kapolei, Hawaii. 14 November 2014. photograph Cory Lum

Honolulu and rail officials want to extend the general excise tax surcharge for many years to pay for operating the rail project.

Cory Lum/Civil Beat

It’s not just the lower incomes that feel pressures from our cost of living and strained economy. We are in the bottom five states for disposable income, and are ranked toward the bottom by many standards of economic well-being — we’ve heard the story too many times before. Hawaii has a huge excise tax already, ranking in the nation’s top seven states for reliance on sales and excise taxes, yet all but two of those top seven exempt food and drugs. We are the worst. The average state collects 34 percent of its revenue from sales tax while Hawaii collects 49 percent.

Another unfair aspect of the rail tax is that everyone is paying and yet only a tiny fraction, perhaps less than 3 percent, would ever ride it. With a local cost approaching $6 billion, divided by our 1 million people, it would cost $6,000 per person, which most people, especially the poor, don’t have to throw away on such a useless item. As always the poorest folks will suffer. Thus far we have seen no remorse in this relentless pursuit of greed.

Consider a thought experiment: If the richest fifth of our population paid out that same 11 percent of their income as excise taxes, the state’s current $3 billion excise revenues would increase by $1.5 billion annually. While it is unlikely the state will start collecting this equal share from the wealthy any time soon, the scenario is offered to dramatize how large a burden the poor are paying for rail. (These figures are derived from census data showing total annual Hawaii income of $42 billion, with the top fifth getting 46 percent or $19 billion, yielding $1.5 billion if 8 percent additional were paid out as excise tax.)

We have many more pressing needs: housing, education, hospitals, roads, food production, sewers, pensions and other unfunded liabilities, recently summed up by Jay Fidell at $40 billion.  If the money is wasted on rail, true solutions for Leeward’s serious traffic issue will never be funded.

Rail Is the Wrong Solution

The other half of the argument against the tax is the folly of rail, spending way over $6 billion on a transit project that will do practically nothing to help our severe traffic congestion. The city’s own EIS numbers show that transit ridership, currently at 5% of trips, will only go up an insignificant amount to 7% of trips with rail and bus. Congestion on H1 will increase 30% in the coming decade with rail, according to the EIS, condemning those Leeward drivers to permanent traffic hell.

At the same time, less expensive, more effective alternatives are available, using new HOV lanes and bus rapid transit, carrying far more people at a fraction of the cost, utilizing some of the existing elevated structure and plans. We have already collected enough GET to pay for most of that option, and don’t need any more taxes. This alternative was never properly examined by Mufi Hanneman’s disgraced administration. Rapidly evolving use of driverless vehicles and ride-sharing apps will add many more enhanced travel modes, rather than relying on 19th-century train technology.

Another folly connected with rail is the pipe dream of TOD, concentrated development near stations, which is very unlikely to happen with any significance considering the shortage of adjacent developable land and vague city plans, which have no enforcement teeth. If any new high-density housing does go up it would probably follow the pattern we see lately, resulting in a majority of very expensive units. The poor would pay for rail while the rich ride.

This TOD ploy is the city’s latest desperate attempt to fool the public into supporting their train. First they claimed it would reduce traffic, then they said it will create jobs and stimulate the economy, and it would be built on time and on budget with transparency and full accountability. None of these claims have proven true, but their big PR budget and support from PRP and other development interests have been misleading many people until now.

Regarding “lost” federal funding, how does $1.5 billion help us when we are already looking at more than a $2 billion cost overrun (for a useless system)? We are only seeing the beginning of cost inflation, which could run to $15 billion for a complete extension to Kapolei and Manoa, not to mention operation and maintenance.

The city administration and HART have been very secretive about what has been spent so far and what to expect when new bids are opened for future construction, but already the cost is about double what was promised by Mufi Hanneman a few years ago. HART refuses to reveal the total cost for Oahu’s 20-mile rail. How many city employees are illicitly working on rail in positions not funded by the GET? There is no accounting for the $1.5 billion collected already via the 0.5 percent GET. Now Caldwell wants a blank check, no questions asked, for an unlimited time into the future, paid for with money from our poorest residents.

Cancel the project before it gets worse, decline further federal rail money, develop less-expensive, more-effective alternatives, then ask the feds for renewed support. It can be done. There is much more federal money available for roads and buses than for rail.

We need to pull the plug on this elevated monster right now and take a time out to seriously examine the finances and to have an honest discussion about affordable, effective traffic solutions. Then we can begin to deal with our many other problems and show some compassion for the poor instead of making things worse.

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About the Author

  • Dennis Callan
    Dennis Callan has been involved for many years with transportation issues including past terms as co-founder and co-chairman of Stop Rail Now, chairman of the Manoa Neighborhood Board, former chairman of the Oahu Metropolitan Planning Organization Citizen Advisory Committee on Transportation and former president of Life of the Land.