A Small Price to Pay: GET Exemption Suspensions the Best Choice to Close Hawaii’s Budget Deficit

TaxesFrom 2009 through 2010, nearly 171,000 Hawai’i public school students were faced with furlough Fridays – accounting for the U.S.’s shortest school year. According to the Time article “ Hawaii’s Fight Over School Furloughs Heats Up,” the furloughs were former Governor, Linda Lingle’s “solution to a projected budget deficit of nearly $1 billion.” Today, our state has emerged past the furloughs in search of other methods to overcome our budget deficit. The most effective ways to do so include more budget cuts or tax changes. State lawmakers and current Governor, Neil Abercrombie, have recently adopted a bill that generates revenue by suspending general excise tax (GET) exemptions on approximately twelve business industries. This tax revenue, coupled with smaller budget cuts, will allow our state to emerge from its debt without slashing programs and services important to the welfare of our citizens.

When Linda Lingle cut seventeen school days from the 2009-2010 school year many of Hawaii’s
residents—including myself and my family—voiced their opposition. Beyond the public
school system, the University of Hawai’i also suffered a $7.3 million budget cut, according
to KHON2 article, “Lawmakers Again Cut University of Hawaii Budget.” As a University of
Hawai’i student, I experienced the increased class sizes and downsized faculty, effects of the
budget cut. The most important factor that emerged from these unfortunate events was a kairotic
opportunity. Faced with the decline in Hawaii’s education system, residents realized more
attention and effort must be put into relieving Hawaii’s debt. Today, we realize that programs
such as the Department of Education need to utilize their entire budget; and ultimately, budgets
should not be compromised to overcome debt, but new tax measures should be created to harness

In late 2010, Linda Lingle’s governorship was succeeded by Neil Abercrombie, prior Democratic
U.S. Representative of the First Congressional District of Hawai’i. Abercrombie was faced
with a plethora of challenges and a staggering budget deficit. According to the Civil Beat
article, “Abercrombie Plan Raises Taxes, Cuts Services,” Abercrombie is looking for ways
to address Hawaii’s $844 million deficit. However, there has been a lot of opposition in
Abercrombie’s proposals to alleviate the debt. One of Abercrombie’s recently shot-down
proposals aimed to tax pension plan recipients receiving more than $37,500 for single or married
individuals filing separately; $56,250 for head of households or surviving spouses; or $75,000
for joint returns. With the amendments made to that bill, though, pension taxations would only
take place if pension recipients earned more than $75,000 for single or married filing separately;
$100,000 for head of household of surviving spouses; and $125,000 for joint returns. With the
revisions made to the pension taxation bill, less than one percent of taxpayers would be affected,
earning the government $17.2 million a year. However, due to the strong wave of disapproval
from the baby-boom generation, this bill was shot down. Now, Hawaii’s government is looking
to industries that can contribute financially to our budget crisis.

The Civil Beat article, “How Much Hawaii Legislature’s Tax Hikes Will Cost You” provides
a detailed look into the newly approved bills aimed at alleviating Hawaii’s debt. Of particular
interest is the elimination of General Excise Tax (GET) exemptions in order to generate roughly
$173 million a year. Starting July 1 through June 2013, two dozen business industries will
see their general excise tax exemptions suspended. Industries including general contractors,
sugarcane producers, petroleum refiners, airlines and tugboat operators are those involved in the
GET exemption suspension. The GET exemption suspensions, coupled with additional bills, are
expected to close Hawaii’s budget deficit over the following two years. Considering the large
difference in revenue produced between the shot-down pension taxation bill and the temporary
GET exemption suspension bill—respectively $17.2 million and $173 million each year—the
GET exemption suspension bill provides the most economically feasible method of addressing
our budget needs.

However, a large public outcry has greeted news of the new [tax] bills. Businesses and
consumers argue that by suspending exemptions, businesses will ultimately hike up prices for
consumers. The Hawaii News Now article, “Suspension of Hawaii Business Tax Exemptions
Causes Price Hike
” by Lisa Kubota illustrates the effects the tax impositions have had on local
businesses. According to the article, Matson will begin implementing a $52 fee per container
on all cargo shipped to and from Hawai’i in July. These new fees will then be burdened by
businesses using Matson, and ultimately the consumer. Hawai‘i Reporter article, “Move Afoot to
Raise Hawai‘i Taxes
” further argues that these measures will ultimately “add to the cost of living
and doing business in Hawaii.” In one of the U.S.’s most costly places to live, locals—especially
Native Hawaiians—already struggle to compete with foreign buyers.

Though there is much opposition to the newly adopted bills, the Honolulu Star Advertiser
recognizes this as “the largest source of new revenue to help balance the state budget.”
According to the same article—“Governor Signs Bill Suspending Business Tax
”—“lawmakers turned to the tax changes, along with spending cuts to state programs
and labor savings from public-sector unions, to close a projected $1.3 billion deficit over two
years.” Most of the articles available voice the public and businesses’ concern for the future of
the consumer, as they will ultimately be the one to pay the four percent general excise tax. In the
Honolulu Star Advertiser article, “GET Exemptions But No Hike on Table,” Abercrombie argues
that the suspension of tax exemptions is simply “getting people who weren’t paying it to pay into
it like everybody else. Some of them have enjoyed that, by the way, for a long, long, long, long
time.” Taking into consideration Abercrombie’s statement, our new tax bill, which is scheduled
to end in 2013, is both just and economically feasible; the relatively small industry shouldering
this burden compared to the large revenue our state will gain makes this a good choice for our
fragile economy.

As we consider the business’ and public’s outcry, it appears that the issues regarding the GET
exemption suspension seem to arise over a conflict of stasis. Opponents and proponents of the
GET exemption suspension must realize that the issue at hand is the sacrifice of programs and
services vital to a healthy way of life. Abercrombie was unsupportive of an increase in Hawaii’s
four percent GET, claiming it would be devastating to our economy – and most oppressive to
Hawaii’s middle and lower classes. Instead, he supported the GET exemption suspension under
his thesis that these exemptions—not awarded to other industries—should [commonsensically]
be paid rather than resorting to further budget cuts.

The most important thing to consider when analyzing Hawaii’s new approach to handling
the budget deficit is Hawaii’s priorities. Do our commonplaces—such as the importance of
education in building a healthy economy—reflect the stasis argued by opponents of this new
bill? Are sacrifices to programs and services which positively influence Hawaii’s communities
necessary in alleviating our debt? Or are tax approaches a suitable alternative? When deciding
whether to side with or against Abercrombie [and lawmakers’] decision to revoke GET
exemptions temporarily, we must consider the stasis of the opposing views. As an opponent
to the sacrifices recently faced by our state education system, I feel the new burden imposed
by the GET exemption suspension is a community-friendly, economically feasible way to overcome our
government’s staggering budget crisis.


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