Small Business News
November 2005 | Online Edition
Upping the Cost of Doing Business in Hawaii
By Lowell L. Kalapa, Tax Foundation of Hawaii
Over the last month as Hawaii’s unique “gas cap” law went into effect, consumers debated and decried the high cost of gasoline at the pump. And while the jury is still out as to whether or not the law is beneficial for Hawaii consumers, the fact of the matter is that crude oil prices remain high.
While most motorists have learned that Hawaii has one of the highest fuel tax rates in the nation when the state and local fuel tax rates are combined and that the general excise tax is imposed on gasoline, they may be surprised to learn that the fuel oil purchased by Hawaii’s electric companies is also subject to the general excise tax and at the full retail rate of 4 percent no less.
One would think that the purchasers of fuel oil which is burned to generate electricity — the same energy in another form — which is then sold to families and businesses would at least pay the lesser wholesale rate of 0.5 percent that would recognize that the energy bought in one form is being resold in another form. But not so, the purchase of fuel oil by the electric company is interpreted as a sale for consumption by the electric company. This is because the fuel oil is not identifiable as such when the final product of electricity is sold to the electric company customer.
While public utilities, such as the electric company, do not pay the general excise tax on their sales of energy to the public, they do pay the in-lieu public service company tax. The public service company tax rate is greater than 4 percent because part of the public service company tax is levied in-lieu of the real property tax and that portion generated by the rate greater than 4 percent goes to the counties.
As crude oil prices soar, the amount of the general excise tax will also rise, adding to the cost of electricity generated by those power plants which use fuel oil. As most consumers have realized, that little line called “fuel adjustment” has continued to rise over the past year and one has to ask how much of that is attributable to the 4 percent general excise tax being imposed on the fuel oil.
Given that energy is so much a part of daily life, the rising cost of fuel oil along with the attendant general excise tax will make living and doing business in Hawaii all that more expensive. While state lawmakers may not be able to control the cost of fuel oil — although some would like to think they can control the price of gasoline — they certainly can control the taxes paid on the purchase of that fuel oil.
And before anyone jumps on the idea that this is just a tax break for the electric companies, one must remember that what those companies can charge consumers is closely monitored by the public utilities commission. Thus, any “break” on the amount of taxes paid on the purchase of fuel oil will show up in the rates charged consumers.
Reducing the general excise tax rate on the purchase of fuel oil by public utilities is not without precedent. Lawmakers reduced the rate of the tax imposed on condiments purchased by restaurants for the convenience of their customers. In that case, the tax department had opined that since the restaurants were not reselling the condiments but making them available to their customers as a convenience, the restaurants were “consuming” the condiments and therefore they were taxable at the full retail rate of 4 percent. Lawmakers changed the policy and allowed the 0.5 percent rate to be imposed on those purchases with the reasoning being that the cost of those purchases is already recovered in the sale of the food products by the restaurant. Thus, the restaurants were viewed as reselling the condiments albeit in the price the restaurant charged for the food or meal they sold.
Keeping energy costs at a reasonable level is crucial to the economic future of Hawaii as businesses factor in all of the costs of doing business when making that decision to locate or continue to do business in Hawaii. If soaring energy costs make Hawaii goods and services uncompetitive on the world market, it is unlikely that those businesses and, therefore, the jobs they create will remain in Hawaii.
While state policymakers may not be able to do anything about controlling the cost of fuel oil burned to generate electricity, they certainly can do something about the taxes imposed on that fuel oil. Since the general excise tax is a percentage of the value of the price charge, as crude oil prices and therefore fuel oil prices rise, so will the amount of the tax.
Now there is an issue that lawmakers can do something about.
Lowell Kalapa is the President of the Tax Foundation of Hawaii. For more information, please call 536-4587 or log on to http://www.tfhawaii.org
Political Tsunami Hits Hawaii
By Rubellite Kawena Kinney Johnson
Hawaii’s governor, the state Legislature and state agencies — namely the Office of Hawaiian Affairs (OHA) dragging along the Department of Hawaiian Home Lands (DHHL) — and many other supporters such as church organizations and community groups, have made the “Akaka Bill” a must-pass measure for Congress in coming months.
And what is the justification for giving up the Ceded Lands of the state of Hawaii and (maybe) the reserve federal/military lands/islands with all mineral rights, natural resources, and water rights to a 200-mile area around the Hawaiian Islands and related “indigenous Polynesian/-Hawaiian” areas in the Pacific Ocean somewhat connected through tradition? These ties could be by voyaging traditions or related contacts during migrations from the south to Hawaii, such as (possibly) Johnston Island, Palmyra Island, Wake Island, and remotely, even parts of American Samoa.
We ask: What justifies getting rid of U.S. military reserve areas where the Navy, Marine Corps, Army and Coast Guard once were and no longer are, such as Midway Island, Kaho’olawe, Barbers Point?
Is it the U.S. political relationship with the Native Hawaiian aboriginal and indigenous people whose ancestors never directly surrendered their sovereignty in the critical period when the monarchy was overthrown (1893) and annexed by Joint Resolution of Congress (1898)?
This indigenous Native Hawaiian sovereignty has been classified in USPL 103-150 (Clinton Apology) as “aboriginal communal tenures before 1778 A.D,” potentially applicable to all lands and waterways over sea (channels), and moreover, under access rights, all mineral and natural resources, with water rights, which, under the international Law of the Sea includes a 200-mile zone in all directions around the island chain.
This is why Kahoolawe no longer belongs to the state of Hawaii, since custody was given to the Kahoolawe Ohana in stewardship, which under the “Akaka Bill” will be “owned” by the Native Hawaiian sovereignty, which I may remind you, consists of “aboriginal communal tenures before 1778 A.D.”
The Ohana makes the rules about who now may go there, when, and for what cultural exercises or events. The same is true of the coral preserve.
Fishermen may not go there now, unless no longer fishing for tabu things in tabu ways. The fact you are Native Hawaiian does not qualify you by ancestry alone to go over there for your own purposes if they are not in accord with the Ohana criteria for anyone being there.
No longer a military bastion, but a native and culture preserve, it’s a prohibited area nevertheless, so for we who are not part of the Ohana, it makes no difference that we may not go there. As a qualified observer satisfying Ohana rules, you are not a participant in Ohana programs without approval.
The tabu fence will always be up if your native interest is for a reason other than what the Ohana believes proper within their own management, which is right out of the old konohiki system.
My eyes were opened when I wrote the report on the astroarchaeological sites on that island for the Kahoolawe Conveyance Commission in 1993, though I actually witnessed political confrontations by groups hostile to U.S. military objectives through ROTC programs on the University of Hawaii campus during the Vietnam War, and I was one of three professors who refused to consent to the nationwide moratorium during the late 1960s when the Students For a Democratic Society occupied Bachman Hall (Administration Building) while the ROTC Building was burned down during protests.
Two other professors were from the College of Engineering; I was the one faculty member from the College of Arts of Sciences who ignored the campus protest by holding classes and giving final exams during the moratorium.
The political leadership of the Hawaiian Studies Center continues a somewhat similar anti-American, anti-military, anti-American missionary, anti-white stance in teaching Hawaiian language, history and culture in order to inculcate younger Native Hawaiian children to the same view: The United States must get out; it doesn’t belong here.
The recent federal $600,000 allocation to the new Hawaii Law Center supports that political position of Hawaiian Studies at Kamakakuokalani Center from the nearby William Richardson School of Law.
The “Akaka Bill” is, therefore, in my opinion, the kind of retributive justice the Congress should consider putting aside until the country has had time to consider what it will mean to get out of the Pacific and out of Hawaii entirely. Else it may well put asunder the whole country’s protections of individual rights to life, liberty and property.
Who would want the United States out of Hawaii except enemies of those constitutional principles, both here and on the mainland, which have always been shared philosophies between the kings of these islands and the rulers of other nations? May freedom prevail, from sea to shining sea.
Rubellite Kawena Kinney Johnson is an emerita professor of Hawaiian language and literature at the University of Hawaii-Manoa. This report was originally published in The Washington Times on Sept. 18, 2005
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