A Taxing Problem – Slight of Hand

A Taxing Problem – Slight of Hand was Originally Posted on August 19, 2005 by lavarock

The phrase “a taxing problem” refers to a problem about a burdensome or excessive demand; a strain. When our politicians talk about taxes, oftentimes they use statements that the public does not understand. Sometimes that is on purpose because if you knew what was really going on, you would not like it.

Politicians often talk about tax credits or tax rebates and the public starts salivating. “Free money” is what they think. The rebate is nothing more than returning to you unused money collected from you already. It does nothing to lower your taxes.

Imagine the following. The cost to run a particular Government project is $30 billion. A perfect world would be for the entity to collect say $28 billion from the public, place it in an interest bearing account until needed and at the moment it was needed, interest would have raised the amount to $30 billion.

Instead, the government entity collects $35 billion from the public, perhaps invests it, perhaps uses much of it to fund other projects, then when the project is done and people start asking what’s up with the money, the entity returns what is left to you as a “refund” or “surplus”. You have given them a free ride!

The public sees the refund or surplus as a windfall for themselves and praises the government for giving them their own money back.

If you think about it, you keep getting CREDITS and REFUNDS when you really should be having to pay less money up front.

Even your income tax works this way. You pay in $500 to IRS and then have to justify every which way to get some of your own money back. There is a CREDIT for this and a DEDUCTION for that.

Wouldn’t it be better for governments to figure out what they need, stick to the budget and only collect what is needed?

Speaking of taxes, I am hours away from attending a meeting with a representative of Govenor Lingle’s office. Well, I say “I” yet it will really be “WE”. We the coffee farmers and macadamia nut farmers, some co-op members and perhaps even representatives of Fedex and the Post Office. It should be a large but hopefully well-behaved meeting. That is, unless I have too much caffeine before the meeting.

The short story is that a bill came before the legislature that proposed a $25 million dollar bond for a group of 3 people to build a coffee and macadamia nut processing plant near the airport in Kona. This bill went largely unnoticed and when we farmers heard about it it was almost too late. We called the Govenor who agreed to Veto the bill. Then, it mysteriously passed without her signature.

The processing plant will contain a very large visitors center and preliminary business records show that they will be processing tremendous amounts of product. We cannot believe that a processing plant is needed and it will only serve those who are floating the bond. We farmers and processors are not having any problems with our production and processing and based upon the size of this proposal, cannot figure out not one of us knew about this in advance. It was kept very low under the radar and even public records only show a paragrah of the proposal.

The gigantic showroom near the airport may draw lots of visitors. Visitors who will end up buying product there instead of at the smaller stores and flea markets on the island. Small farms have a hard enough job getting stores to carry product as it is without the expensive barcodes.

The other “gotcha” in this is not whether the company doing this is going to make money (none of the farmers I spoke with will use this plant) but that the company gets a TAX FREE ride!

What could be going on with this deal? We think we know as it is very similar to something that happened on the mainland concerning wine..

Right now we market products as created and processed in the islands. However, “Made in Hawaii” does not convey that same idea. It would be possible to import products from elsewhere, process it here and call it “Made in Hawaii”. The public would not differenciate between a 100% Hawaiian product and “Made in Hawaii”.

If you think this is not true, consider the coffee marketed as KONA BLEND. A coffee blend is a mix of coffees. Generally, these are 10% blends which means that only 10% of the coffee is Kona coffee (and not award winning Kona at that) and 90% coffee from elsewhare. If the coffee is only 10% Kona and let’s say 90% Columbian, should it not be called a COLUMBIAN BLEND? The name Kona is used on the label to fool the consumer.

As you can see with both taxes and coffee, convince the public that the lesser of two options is the best for them; and make them feel good about it.