Local connection: Tough tax decision - Hawaii News Now - KGMB and KHNL

March 12, 2010

Local connection: Tough tax decision

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The Democratic legislature and the Republican governor have key tax relief for every employer in the state. It's a strange tax that has taken a starring role in efforts to keep unemployment from getting any worse. Every year, each employer pays a payroll tax, so much money for each employee. The money from this tax is the money paid out when people get unemployment checks.

This tax could be a symbol for the difficulty of weathering a slump. If it's too low, the unemployed can't get their benefits. If it's too high, the burden on employers could actually create more job cuts. What the legislature passed, and what the governor signed, sets the stage for the payroll tax to increase sixfold this year, to more than six hundred dollars per employee. A huge tax hike! But without the law it would have gone to more than a thousand dollars.

Such are the tough decisions lawmakers face these days as they struggle to help employers create new jobs that will grow us into recovery. The economic lesson here: taking from Peter to pay Paul can make it harder for Peter to pay Paul directly.