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Hawaii’s teachers demand tax bump to boost salaries

By   /   February 5, 2013  /   No Comments

Tax Foundation Kalapa: Penny tax ain’t a penny, and would burden average Hawaiians.

By Malia Zimmerman | Hawaii Reporter

HONOLULU — Hawaiians already pay among the nation’s highest taxes, and the state’s Department of Education already gets a good chunk of the revenue from those taxes — nearly 50 percent of the state general fund budget or $2 billion per year in total expenditures from all sources.

But some public school teachers say that’s not enough.

They’ve organized a campaign to boost teacher salaries with funding from a substantial jump in the state’s primary tax, the General Gross Income Tax.

At a February 5 legislative hearing, teachers wearing white-and-red tee shirts that read “Teachers Taking a Stand: You cannot put students first if you put teachers last” told House Economic Development Committee members they support a plan to raise the General Gross Income Tax by 1 percent with revenue set aside for teacher pay raises.

Teachers maintained they need higher pay, better working conditions and access to new technology. A “penny” increase for education — that’s what supporters call it — is not too much to invest, they said.

The 1 percent increase works out to a 25 percent increase in the rate.

“The General Excise Tax is perhaps the worst tax to increase as far as rates because of its broad-based application,” said Lowell Kalapa, president of the Tax Foundation of Hawaii. “Increases in the cost of living, as well as the cost of doing business in the state, will drive more and more businesses out of operation and with them the jobs Hawaii’s people need,” Kalapa said.

“For teachers who have requested this increase in the tax to fund their salaries, they should acknowledge that they are just making it worse for everyone as the cost of food, shelter, clothing, transportation and every other essential household item will increase making it harder for all families to survive,” Kalapa added.

Kalbert Young, the director of the state Department of Budget & Finance, said the administration is opposed to the plan.

While the tax increase would bring in an additional $400 million to $600 million, depending on the state’s economic activity, it would burden the general population, Young said.

“We don’t see that imposing that level of tax burden (on the general population) for one purpose,” Young said.

Hawaii is the only state in the nation with a General Gross Income Tax, a tax charged on every transaction of goods and services in the state. On Oahu, the rate is 4.5 percent, while the neighbor island counties have a 4 percent rate.

Hawaii has no sales tax, but the GE Tax adds up to a sales tax of about 12 percent sales tax, according to Kalapa said, because of its pyramiding effect.

Meanwhile, the state and the teachers’ union, the Hawaii State Teachers Association, continue contract negotiations. Negotiations have broken down on several occasions, with the union describing the process as “long and difficult.”

“It comes down to what type of education system do we want, and are we willing to make the necessary investment? For the sake of our students we need to be honest on what the State is committed to,” said HSTA President Wil Okabe.

In late January, the state negotiation team told the Hawaii State Teachers Association it “cannot responsibly accept its latest proposal, which would cost the State $1,050,445,815 over four years, mostly in additional compensation and benefit expenses.”

The HSTA countered that the state “inappropriately” included the cost to repay the 5 percent pay cut that teachers took when the state was facing financial difficulties, for a total of about $180 million. That repayment, the teachers said, “is not a raise.”

“Simply put, teachers surely must be worth more than 2 percent,” Okabe said. “This contract is about fulfilling a promise to restore pay cuts, but also valuing and investing in teachers as being essential to the future of our students.”

Kalapa said teachers do have a legitimate complaint that should get attention from lawmakers and state Board of Education members.

“Teachers are being asked to do more and more administrative paperwork and are spending less and less time in the classroom,” Kalapa said. “If nothing else, the funds that are being appropriated to the DOE are failing to reach the classroom because of the top-heavy administrative structure of the department that demands reports and schedules and evaluations to justify the role of administrators.

“The frustration of classroom teachers is that they spend too much time filling out forms and reports and not enough time in the actual classroom. Unfortunately, with more than 25 percent of the general fund budget, the Department of Education still cannot get it right. Until it does, there is little justification for an increase of financial resources let alone an increase in the General Excise Tax.”

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Malia Zimmerman