It’s Time For Hawaii To Tax The Rich - Honolulu Civil Beat

About the Author

Jeanné Kapela

Jeanné Kapela represents District 5 (portions of Keaau, and Kurtistown, Mountain View, Glenwood, Fern Forest, Volcano, Pahala, Punaluu, Naalehu, Waiohinu, Hawaiian Ocean View, Hookena) in the Hawaii State House of Representatives.

Tax the rich.

As the economic downturn continues, that singular phrase has become more than a trendy progressive rallying cry. It’s a statement about the restructuring of our social and economic priorities, which have been upended by the pandemic.

Today, our state is facing an estimated $1.4 billion budget shortfall.

Congress’ recently passed $900 billion relief package will provide a short-term boost to our state’s finances but not at a level needed to stem future fiscal discomfort.

The Hawaii Department of Education, for example, is confronting a $400 million budget crunch, when reductions from potential furloughs, the DOE’s austere biennium spending proposal and $95 million in restrictions already incurred by the department are combined.

That’s not just a recession. That’s a crisis for our keiki.

At the same time, working families have been disproportionately harmed by the economic devastation wrought by COVID-19.

Last year, our state experienced levels of unemployment not seen since the Great Depression. Kahului’s unemployment rate skyrocketed to 35% in April, nearly 10% higher than the national unemployment rate at the peak of the Great Depression, according to the U.S. Bureau of Labor Statistics.

Working women, who continue to earn less than men for similar work, represent nearly two-thirds of essential workers in Hawaii and account for 56% of all jobs lost during the coronavirus pandemic, per data from the Hawaii State Commission on the Status of Women.

Two women wait for the start of a food donation event for homeless and others in need at the Hawai'i Cedar Church in Kalihi, HI, on Monday, June 8, 2020. (Ronen Zilberman photo Civil Beat)
The pandemic has hit Hawaii’s women harder economically than its men. Here, two women wait for the start of a food donation event for homeless and others in need at the Hawaii Cedar Church in Kalihi. Ronen Zilberman/Civil Beat/2020

Unpaid household and caregiving activities are predominantly performed by females, as they have been throughout history, making the financial disaster even harder for women to bear as the demands of child care, home care and health care have become even more unrelenting than usual.

Yet, the pandemic’s financial hammer has not pounded everyone equally. In September, single-family home purchases hit a record $880,000 median price tag in Honolulu, an approximately 10% increase over the previous year.

Nationally, U.S. billionaires have gained almost a trillion dollars in wealth since the first public health emergencies were declared.

Budgets are about allocating resources. Ultimately, our state’s fiscal choices — including decisions about raising revenue — reflect our political and socioeconomic priorities. As we craft the islands’ economic recovery, the choice is clear: Will we continue a status quo that damages our most vulnerable residents or will we finally put people before profit?

This year, I will introduce an omnibus revenue generation bill to close the state’s budget shortfall by increasing taxes on those who can afford to pay a little more to uplift their neighbors’ well-being.

To begin, my proposal would raise income taxes on our state’s highest earners, with those in the top bracket paying a 13% income tax rate.

My bill would also gradually phase out the benefit of lower tax brackets for Hawaii’s richest residents, who pay a significantly lower portion of their earnings in state and local taxes than lower-income families, while increasing our state’s capital gains tax to 11% for wealthy investors.

Additionally, we should replace our state’s tiered corporate income tax with a flat rate of 9.6%.

Hawaii ranks 34th in the nation in corporate tax collections, according to the Tax Foundation, bringing in $103 per person.

New Hampshire, in contrast, generates nearly $600 per person in corporate taxes.

Moreover, 30 states have established a single corporate income tax rate. Since a corporate income tax is only levied on business profits, those suffering losses because of the economic downturn don’t have to pay a dime.

Given the escalating cost of home prices in the islands, it’s clear that state leaders need to use our tax system to disincentivize investment property speculation.

We can do that by raising conveyance tax rates (taxes paid on property sales) for properties valued at a million dollars or greater.

Residential investors are taking advantage of low interest rates to turn our state into a private Monopoly Board. If we want to resolve our housing crisis, we cannot allow that to happen.

Finally, following the strategy pursued by lawmakers during the Great Recession, we should temporarily repeal general excise tax exemptions that distort the application of our state’s biggest source of revenue.

In 2011, legislators briefly suspended 31 excise tax exemptions to address the state’s deficit. Those exemptions were valued at over $250 million in 2018, according to a report published by the state auditor last year.

Together, these proposals could generate over $700 million per year for our state, enough to completely plug the existing budget gap and ensure that essential services are sustained for families who are struggling to survive.

Politicians often talk about putting the needs of everyday people ahead of the greed of their political donors. This year, that campaign pitch has become an urgent test of our moral character.

For the sake of Hawaii’s people, we cannot afford to fail.

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About the Author

Jeanné Kapela

Jeanné Kapela represents District 5 (portions of Keaau, and Kurtistown, Mountain View, Glenwood, Fern Forest, Volcano, Pahala, Punaluu, Naalehu, Waiohinu, Hawaiian Ocean View, Hookena) in the Hawaii State House of Representatives.

Latest Comments (0)

If the state was smart, they would implement their own property tax only on those owners that reside out of state.  That would either force said owner to accept the additional taxes as is, move here which would have them pay state taxes, or sell the property.  It would be a win for the state because they would gain additional tax revenue in the first two scenarios.   If the third scenario started happening in droves, there might be an oversupply in available housing which could force down the prices of real estate here allowing current residents to possibly be able to buy a home if the prices dropped enough.  

Buck · 2 years ago

Like most of us (myself included), what is "the states highest earners"? Reference the table below from the 2019/2020 Hawaii Tax Table:2019 - 2020 Tax Bracket Tax Rate (Married Filing Jointly)$0.00+1.4%$4,800.00+3.2%$9,600.00+5.5%$19,200.00+6.4%$28,800.00+6.8%$38,400.00+7.2%$48,000.00+7.6%$72,000.00+7.9%$96,000.00+8.25%$300,000.00+9%$350,000.00+10%$400,000.00+11%Based on this table, my family and I fall in the "highest earners" category which means we will be impacted by Ms. Kapela's bill. I applaud her desire to bring solutions to the table but her assumption that we can "afford to pay a little more to uplift their neighbors’ well-being" is very narrow minded. We don't drive fancy cars nor do we live in an upscale community or live lavishly but we are considered "highest earners". As "high earners", we can no longer qualify for financial aid, IRA's, etc. like our "neighbors" can but the easy out is to tax us because "on paper", we look like we should be penalized for working hard to get where we are today. Business 101 - Lean operation + Increase ALL revenue = Positive net Summary - Tighten up the operation, then I'll pay higher taxes. Until then...NO WAY!

808_Facts · 2 years ago

Let me get this straight -- the author advocates for more money to a government that has brought us the boondoggle called the Honolulu Rail Transit Project.  What we need to do is move to a part-time legislature where our elected officials have to work a full-time job like everyone else.  It would bring real world experience to them and help in making sure they come up with true working solutions.

JZaby · 2 years ago

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