Ka Wai Ola - Office of Hawaiian Affairs, Volume 6, Number 8, 1 August 1989 — Taxes and You [ARTICLE+ILLUSTRATION]

Taxes and You

By Lowell L. Kalapa, Director Tax Foundation of Hawaii

How mueh of your tax dollars goes for . . .?

A question frequently asked by the average taxpayer goes something like this: "How mueh of my ineome taxes were spent on education?" or "How mueh of that four percent I pay goes for the park in my neighborhood?" It seems a simple

enough question. In plain dollars and cents there is no easy answer because of the way government accounts for the taxes and fees it collects for publie services. Nearly all tax dollars collected by state government go into a big pot called the general fund. It's called a general fund because it is just that, a fund where unrestricted public dollars are placed until they are designated by the state legislature. This designation is part of the annual budget process. The budget process allows the legislature to look at all public needs and set priorities for funding. Because the funds are not predesignated, the amount of money spent on a particular program ean change from year to year. One year, the high priority may be on health issues such as air pollution or contamination of drinking water. The next year, as was the case this past session, education might have top priority. Thus is it understandable that more than 90 percent of the general fund is comprised of your tax dollars. These are dollars we pay to state government to insure the general welfare and safety of our community is maintained through public programs. In some cases, where there are public facilities or programs whieh function in direct relationship to the amount of how mueh the public uses them, the programs or facilities are underwritten by fees or taxes paid by the users and are "earmarked" for those facilities or programs. Such as transportation facilities. For example, highways driven upon by private automobiles and commercial vehicles are paid for by what is called "user taxes." These are the fuel taxes we pay on gasoline purchases, the registration fees we pay annually, and vehicle weight taxes paid depending on the weight of our vehicles. Eaeh of these tax-sources is a measure of the use we make of public highways. For example, the fuel tax is a measure on how mueh we drive, measured by the amount of gasoline used. The weighttax is a measure of how mueh wear and tear our vehicles impose on the asphalt. (Heavier vehicles take more out of the public highways than lighter cars.) The registration fee ean be seen as an "admission fee" for the right to travel or enter upon the public streets. Similarly, the airport fund is underwritten by fuel taxes and landing fees paid by airlines flying in and out of state facilities. Concession fees are paid by stores in public airport facilities for the privilege of selling to people arriving or departing. Ships and boats entering state harbors pay docking and wharfage fees to the harbors special fund for the upkeep and replacement of harbor facilities. So the difference between the special funds and the general fund is that the facilities and programs of a special fund are identifiable as they are paid directly by user fees whieh reflect the amount of use of eaeh facility. General fund programs are for the general good of the community. The other question on state finances is: how do taxpayers know they are getting back (in public projects or programs) what they put into the

general fund in the way taxes. It is a matter of legislative prerogative how the general fund money is spent, depending on what the pressing issue or problem is from year to year. The problem becomes even more complicated when trying to identify whether or not a particular district or county is getting its fair share of the budget pie. Because of Hawaii's centralized government, mueh of the administrative costs for state programs or projects are attributable to the central office whieh is more than likely located in Honolulu. To be fair, a part of these administrative costs should be allocated to the district or county in question. For example the salary for the superintendent of education or the director and deputy director of health should be allocated to eaeh district. This might be a difficult, if not impossible task. However, to get an honest picture of how mueh is being spent in a particular district, these overhead costs should be allocated. While some taxpayers may feel they are being short-changed in state spending in their district for what their district contributes, such a criticism cannot be justified without knowing how mueh is being spent.

This brings us back to the point of accountability. The reason we have an elected system of government is because the people of Hawai'i entrust the decision making to elected officials. When these officials act or vote on issues, they are supposed to represent the views of the constituents in their district. If taxpayers do not believe that they are getting a fair shake in public programs for the amount of taxes they pay, these sentiments should be eonveyed to their elected officials. Remember, the bulk of the taxes you pay goes into the state general fund over whieh you lawmakers have discretionary control to insure his or her constituents get their "fair" share. If your elected official is ignoring your wishes, then perhaps a replacement is necessary. In any case, the art of state finances is not an easy subject to understand so don't be embarrassed if it seems like Greek to you. What is important is that the taxes you pay are spent by your lawmaker eaeh time the budget process is undertaken. If you don't put in your "two bits" on how that money should be spent, then you have to live with the consequences.