Can we tax our way out of recession?

In the course of this one week, Hawaii officials have suggested (1) reducing the scope of the state's technology tax credits, and (2) hiking the state gasoline tax by a dime to 27 cents a gallon. Most people who discuss these and other revenues will adopt cookie-cutter views we have heard before. It might be helpful to approach the issues from this angle -- what's the objective? Will it work? What else happens? At the heart of the matter is this dilemma for politicians and public alike: everybody wants economic stimulus but nobody wants to raise taxes. So where does one get the money for stimulus? And let's not waste time pretending that cutting taxes will stimulate the economy. You can take less money from people and businesses, or hand money to them, but it doesn't automatically follow that they will spend it. Last spring's mass-mailing of checks to Americans provided a brief sales bump to Wal-Mart, nothing more. More recently, Washington has pushed money at banks, and most banks have been sitting on it. As a practical matter, what Hawaii and the nation need are stimulus plans the effects of which can be depended upon. There isn't enough money left to hand it to someone and hope they do what you want them to with it. "We want them to spend it on booze and women but all they do is keep it in their accounts!" Where was I? Oh, yes, the two proposals made this week. Technology tax credits Department of Taxation officials have been arguing for years that the state's technology tax credits "cost" Hawaii megamillions and the credits should be abolished or narrowed. The technology tax credits have created some of the best jobs Hawaii has -- jobs that pay well, jobs that enable our children to return home from jobs in California, jobs that are practically immune to the recession. The number of jobs is greater than any published figures because much of the work has been created in the local film industry, in which many of the workers are freelancers. Affluent Hawaii residents who previously made most of their investments on the mainland were induced by the technology tax credits to put some of the investment money right into the Hawaii economy. State officials had tried for years to achieve this through other means. They also paid a lot of money outright to lure movie projects, though no one ever mentions that in discussions of the tech tax credits. I concede the possibility of a hypothetical alteration to the credits, X, which would close alleged loopholes while still keeping the credits as a job-creating, economy-diversifying machine. But it hasn't been justified yet. Road projects Governor Lingle and the Democratic transportation committee chairmen this week jointly announced that they wanted to raise billions by hiking the gas tax 10 cents a gallon to improve more than 100 roads across the state. They enumerated the projects, gave a price tag for each and every one, and further stipulated that the tax hike would only be triggered after two consecutive quarters of at least 1% job growth. The knee-jerk negative reaction to gas tax increases is, I think events have proven, something of a sham. Gas prices have changed more than 90 cents a gallon in the past year, based on the AAA statewide price averages, and the majority of Hawaii motorists did not change either the vehicle they drive or the amount they drive. Representatives of the oil industry have been in the habit of telling us that taxes are the main reason gasoline "costs so much," but they raised prices several times as much as the tax and expected us to understand. Now the economy needs stimulus and road work will put people back to work, and we expect them to understand. Will putting construction workers back on the job stimulate the economy? It has to. The employed worker cannot simply sit on his income. He must buy or rent lodging, get clothes to wear, yes, and fill the tank to get to work. And we would have to repair these roads eventually anyhow.