Danny De Gracia: Let's Raise Taxes On Things Other Than Property Or Income - Honolulu Civil Beat

About the Author

Danny de Gracia

Danny de Gracia is a resident of Waipahu, a political scientist and an ordained minister. Opinions are the author's own and do not necessarily reflect Civil Beat's views. You can reach him by email at dgracia@civilbeat.org or follow him on Twitter at @ddg2cb.

Prior to the 2021 legislative session, there was a sense among political observers that Honolulu’s big square building would be allergic to new taxes or new spending. Yet, for a state like Hawaii where government spending accounts for such a significant share of the local economy, these difficult choices are inevitable in the absence of a clear plan for continued federal COVID-19 assistance.

I have historically held the belief that all taxes distort the economy and cause what I call the “potato chip effect” on government spending; once you take a tax bite, it’s a “betcha can’t have just one” problem, because ultimately legislators will find themselves needing more in the future to fund more spending. But are some Hawaii taxes and fees better than others?

In the early 2000s when I worked at the Legislature, I always helped both Democrat and Republican legislators alike research either tax cuts or alternatives to funding government that involved restructuring spending. But my thinking began to shift not as a result of anything that had happened here in Hawaii politics, but as I observed my home state of Texas beginning to implode under the weight of burgeoning property taxes.

Texas, which has no state income tax, deceptively pitches itself as one of the best states to live, work and play. However, what is not revealed is that local Texas government disproportionately places the burden of funding a blinding array of public projects on property taxes. Consider this: Texas ranks seventh for highest property taxes in the nation, whereas by contrast, Hawaii ranks last for the lowest property taxes in the nation.

A number of my conservative and libertarian friends in Texas who knew I was politically active in Hawaii suggested in 2010 that I meet with some people and look at some tax proposals. I was hesitant at first, but I gave it a shot.

“We have to look for a better way to fund education and essential public services,” a nurse who owned a large Texas ranch told me. “All taxes are bad, but if you absolutely must pay for government, tax people in a way that targets things they have a choice to avoid. Property taxed is not property owned, but sales taxes are up front, and at least you can avoid them. You don’t have to buy Jack Daniel’s, for example, and if you really need alcohol, you can just wait till later to buy it.”

I have to admit, I laughed, but the ranch owner’s analogy made sense to me.

Hawaii State flags blow in the wind on opening day of the 2021 legislature.
The Legislature needs to make tough calls when it comes to new taxes and fees. Cory Lum/Civil Beat/2021

While this gets into the quagmire of government determining what’s essential or non-essential for the public, the truth of the matter is I would rather government hit me with an end-user tax on things I can either save up for or avoid entirely rather than hit me with more income taxes or property taxes.

Here in Hawaii, well-meaning legislators traditionally like to say that these types of taxes are regressive, because – and I’ve heard it so many times that I can recite it from memory – “they fall on the most vulnerable, low-income populations who need these things the most.”

A lot of my local Republican friends buy into that narrative, but I’ve always considered that statement to be pejorative, if not insulting to minorities, because it almost assumes that Native Hawaiians, Filipinos, Micronesians, and so on have nothing better to do but smoke cigarettes, vape, drink alcohol and sugary beverages, and eat bags of chips or candy all day. If anything, these vulnerable populations need the potential community support that could be provided by government interventions funded by taxes on these types of items, and they need to be spared new taxes on their income or property.

We witnessed a kind of public freakout when, for example, bills were unveiled this session like House Bill 771, relating to liquor, which proposed new taxes on alcohol, or measures like Senate Bill 63, relating to electronic smoking devices, which would have increased licensing fees. Reactions to these kinds of taxes or fees on social media, like everything else in this pandemic, have bordered on outright existential histrionics.

We are led to believe, if you follow social media, that even the slightest increase or application of new taxes and fees will lead to the unraveling of our economy and a disaster of biblical proportions in Hawaii. Nothing could be further from the truth. If anything, taxes on non-essential things or sin taxes are a reasonable compromise and an opportunity for additional revenues that the Legislature should not miss out on.

Legislators may be doing the calculus in their heads of what might happen to them, electorally speaking, if they vote for new taxes or fees. The reality is, someone is going to need to make a tough call. If this Legislature doesn’t do it, another will do it in the future under worse circumstances.

As Admiral Hyman Rickover once said, “One must be ready to change his line sharply and suddenly, with no concern for the prejudices and memories of what was yesterday.” If there’s an opportunity to raise revenues with means that minimize the impact to people’s quality of life, we make use of it. Tax policy should be about causing the least amount of disruption to people. Bills that tax things other than personal income or property should definitely be on the table in 2021.

Read this next:

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About the Author

Danny de Gracia

Danny de Gracia is a resident of Waipahu, a political scientist and an ordained minister. Opinions are the author's own and do not necessarily reflect Civil Beat's views. You can reach him by email at dgracia@civilbeat.org or follow him on Twitter at @ddg2cb.

Latest Comments (0)

While the idea of sin, or usury taxes may be more appealing to some, particularly those who they do not affect, but what is unacceptable is the fact that our politicians come to the table year after year with the intent of raising taxes period.  It's plain insulting, particularly now.  I was hopeful that the big lesson learned over the past year was that you can't squeeze money from people and businesses that don't have it.  The blood from a turnip adage.  What we should expect from government are ways they can streamline, reduce costs, become more efficient and if at all possible downsize.  It's not just the golden tourism goose that has been killed, it's nearly all private businesses, small and large.  I'm wondering if our politicians have a clue what is happening to the private sector, just because public employees remain unaffected?  Rather than finding new ways to tax, government should be looking for ways to bring tax relief and to energize the private sector so that their lucrative excise taxes can being to flow again.  Government needs to streamline and keep their hands out of private enterprise, in other words, no new taxes.   

wailani1961 · 2 years ago

Like other readers have mentioned; Before increasing the tax burden of any citizen, a monumental effort should be place on making government processes efficient and fiscally responsible.  Launching an initiative of this nature would be the quickest means of yielding substantial financial results.  How substantial you ask?  We may never know!

Michael808 · 2 years ago

Thank you, Danny for writing this well thought out piece! The government should focus on taxing or increasing taxes on all unhealthy items and bad habits, including cigarettes, the act of smoking, texting while driving, alcohol, soda, littering, etc. We don't need any of the things I just mention, so why not get rid of them through taxes while helping the state build up its revenue? 

MK1309 · 2 years ago

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