 Welcome back to Think Tech. I'm Jay Fiedel. It's a 10 o'clock block here on a given Thursday with Tom Yamachika talking tax with Tom. And today we're talking about taxes in the tank hidden charges at the pump. What an exciting topic, Tom, and it's a great way to frame our conversation. Welcome to the show. Well, thank you for having me, Jay. It's another taxing topic. And this one is regarding the, you know, dreading the day when we got to go to the gas station and fill up at the pump between, you know, COVID-19, Russia versus Ukraine, and other economic factors. We are really feeling the pain, you know, perhaps less here than some places on the mainland. But we are feeling the pain here. The gas prices are over five dollars a gallon. And that was, I think, a couple of weeks ago. It's gone higher since then. So what is the government taking out of it? I mean, what has the government got to do with that increase? How is the government affecting that increase? Oh, there's lots of ways. There are a lot of different taxes that go into the price of the pump. We start with the, with the feds, they have a gas tax of 18.4 cents. OK, but that's that's just for starters. Then we get into the stuff that we impose 18.4 cents on a gallon. Yes. Oh, OK. That's and as we will see, that's peanuts compared to what else, you know, what else we are whacking on it. We have a state fuel tax of 16 cents per gallon. And then there's a county fuel tax. The cheapest county fuel tax is here in Honolulu at 16 and a half. That's another 16. OK, and it goes up to 24 cents per gallon on Maui. So the other two counties are kind of somewhere in between. Then there's a component called the barrel tax, which is imposed on any imported petroleum product or and or in other fuels. And its official name is the environmental response, energy and food security tax. What food security has to do with the price of the pump? I don't know, but, you know, that's what it is. We should spend a little time on that later in the show. Yep. This is one of the taxes that kind of went up, you know, heartily over the years, it started off as a nickel per gallon. I'm sorry, nickel per barrel. Now, barrel is one forty second of a gallon. OK. And in, you know, the short period of time that we've had the barrel tax, it went up from five cents per barrel to a dollar fine per barrel. So an increase of twenty one X and it now works out to two and a half cents per gallon. OK, it's small now, but there's other, you know, interesting and and, you know, perhaps foreboding the sights on the horizon. Are you done listing all the taxes on the barrel? Oh, not at all. OK. Then, of course, there's our GT, the general excise tax at four percent of the sales price, which is added on onto which is added another half percent in all counties other than Maui. So if we're talking about five cents has, you know, I'm sorry, five dollars a gallon as an example. That's that's what, you know, that that's what I paid recently that adds another twenty two and a half cents per gallon. OK. So all of all the state taxes that I've mentioned, I add state fuel tax of sixteen cents, Hodel County fuel tax of sixteen and a half, barrel tax of two and a half and GT at twenty two point five. That brings us to fifty seven and a half cents per gallon so far. Well, if you add to your gross excise on top of that, aren't you taxing the tax? Oh, yeah. Well, of course, you are. I think there's an exemption for certain of the taxes, but. It's, you know, the effect is very minor, if any. Yeah. Let me ask you this question. I mean, I like to ask questions that I think somebody out there in viewer land would be interested in. And that is why? Why is gasoline such a target? It's like festooned with taxes. Well, what makes it such a magnetic commodity that everyone should be taxing it this way? What happened here? I think I think the part of the part of the issue is that people got to buy it. You know, if, if. You know, if you want to go around anywhere in this state, you got to have wheels. And so so there there's a lot of Yeah, well, it's easy to collect. See the guy at the pump who sells it to you, he's collecting the five dollars and he's paying these various taxes. It's a snap for the government and the government gets 100 percent collection. It's very easy for them. They know who the the automobile dealer and the gas dealers are. They know who the manufacturers are. They know who the importers are. So it's it's it's pretty easy. There's not a huge universe of people from whom they have to collect tax. OK, now you scared us all by saying this was not the end of it. Let's hear the bad news, Tom. Well, let's let's let's start with. The carbon tax. OK. And our legislature, there is a set of people. And, you know, there's more or less depending on depending on the legislative season, who think that the price at the pump needs to be raised big time. And the reason for that is to combat the environmental threat posed by burning fossil fuels. So in the past several legislative sessions, there have been carbon tax proposals supposedly to pay for the societal costs of pollution, global warming and so forth. Now, in the past session, our bill number was House Bill 2278. And the proposal in that bill was to change the barrel tax, which started, you know, which is now dollar five to a minimum of five dollars and twenty seven cents increasing in phases to thirty three dollars and sixteen cents per barrel when fully paced it. OK, what that translates to is twelve and a half cents per gallon initially and seventy nine cents a gallon when fully phased it. So that would change the state and county tax on a gallon of gas from fifty seven and a half cents to a dollar thirty four a gallon if adopted and fully phased in at least now. If it adopted, what's the status of that change? It died last session. But that means that somebody else will raise it next session. That that's absolutely right. There are, of course, those who don't think an increase of this magnitude is enough. The carbon tax proposed by House Bill 2278 starts off at, you know, if you use the conversion factors on the government's websites, about fourteen dollars per metric ton of carbon dioxide emitted and increased to about eighty nine dollars per metric ton. OK, again, this is on a metric ton of carbon dioxide gas emitted by burning gasoline. And you can you can calculate that? Yeah. The various groups have suggested that a higher tax would be absolutely required to drive compliance with the state's net zero emissions goal by 2045. Now 2045 is not that far away. No. And we are, you know, making some progress. But, you know, at the current pace, there's no way we're going to hit in a net zero emissions by 2045. OK, so there are people I think who have proposed raising the carbon tax, you know, if it's once it's adopted to as much as one hundred fifty dollars per metric ton. I don't think anybody has a carbon tax of that magnitude yet. But, you know, so this is intended to be the the stick as opposed to the carrot that forces us to go faster. Well, it forces us to stop buying gas. That's what it's going to do and presumably go to renewables and electric vehicles in this case. Right. You know what? What I don't get. And I hope this is something that doesn't disrupt the, you know, your train of thought. But we have a situation now globally where the price of oil is, you know, dramatically increasing. And call it the Putin tax, call it the Ukraine tax, call it the Rupal tax, but it's having an effect on the price of gas for cars everywhere. And it's dramatic. In fact, in a lot of places, it's more dramatic than it is in in Hawaii. So and my guess is that's going to continue. The whole affair in Ukraine, the whole thing with Putin is that he is he's the kind of guy like Trump that that drills down. He's doing it and doing it and doing it. However, you know, objectionable it is. He's a persistent kind of guy. Persistent kind of guy. Thank you very much. And so, you know, the war in Ukraine is going to continue. The problem with grain going to developing countries to will continue and people will starve. The problem with the economy of Europe will continue. And the problem with gas prices and fuel prices from gas problem, you know, the gas gas. I mean, what do you call it? Liquid natural gas and all that. That will continue. So what I'm concerned about is that these guys in the Hawaii government want to keep increasing by these dramatic steps, carbon tax or otherwise, while the price of gas is going up, they're really going to make it hard for the average Joe to get around. Am I right? Oh, yeah. And, you know, from the point of view from some people, like the environmentalists, for example, that's exactly where we need to go. You know, we want people to stop driving. We want them to go to that bike store down the street and pick up a bike. Well, at the same time, you know, you talked about the barrel tax and talked about, you know, the original purpose of the barrel tax was to de-incentivize gas and then take the product of the taxes, take the taxes collected and somehow apply them to clean energy. That was the original purpose of the barrel tax. Well, the barrel tax was originally there to create a fund to combat oil spills, if one should happen here. Oh, OK. That was like way, way, way, long time ago. Now you're old as I am, so you can talk like that. I don't know about the age thing, but but I do go into Foodland and they, you know, and they click that senior discount button without me asking, so that that depresses me. I'm sorry for you. But anyway, I mean, more recently, the whole thing with barrel taxes, we got to collect the money so we can apply it toward, you know, environmental action measures and food security. Well, you know, the food security thing is really interesting. Because what I get out of that is it goes, am I right, into a fund that does not contribute to clean energy, particularly, and does not contribute to food security either. So what are we achieving? Yeah, there are there are a number of earmarks on the barrel tax. It's it's been kind of a favorite target of lawmakers. So everybody wants a piece of it. Yeah, like the Department of Land and Natural Resources has a couple of funds that it gets. There is, in fact, a food security fund that the barrel tax feeds, which is, you know, and that that's why it got its name, you know, extended to food security tax. Environmental response is when it started, energy is, you know, kind of, I suppose, an all-encompassing name. And the other thing is it went from five cents, as you said, to a dollar five, presumably, you know, most of all of that should have gone to the purpose that was most prominent, that is developing renewable energy. But I don't think much of it goes to renewable energy. In fact, I don't think much of it goes to food security either. I think it goes to wherever they want to put it in a given year. It seems like it changes all the time. And the legislature sees it as a sort of an open target. And right now, I think half of it goes to the general fund. And then half of it is split into various, you know, special pots of money, including the Department of Transportation for roads or something. Or well, they get the regular gas tax. Yeah, they get this on top. Yeah, right. Yeah, the Department of Transportation gets the regular gas tax at 16 cents. The there are county departments of transportation and they get the, you know, the 16 and a half to 24. You know, that's that's their piece. And of course, the state general fund also gets the GT and and the counties get pieces of the half percent surcharge if they if they adopted it. I see fragmentation all around us here today on this. And, you know, we talked about it last week. I mean, you know, who knows where it goes? Who knows? Where is the comprehensive plan? Who is in charge of these various the separate taxes and separate special funds? Supposed to, you know, help clean energy or whatever food security. And, you know, I think I think it really needs them. Well, I mean, that's that that's why we at the Foundation have been reeling against special funds all this time, because, you know, there are so many special funds, there are thousands of them now. And then, you know, if you you task one person with the with the task of how much money does the state have? They won't be able to give you that answer. There's no way. Because, you know, even for the state departments that are supposed to monitor such things like budget and finance, you know, they're supposed to get a report, the legislators supposed to get a report and not all of the other executive not all of the executive departments follow that law. Oh, I forgot or oh, oh, you're right. Well, I'll we'll talk to everybody, but there's 10 foot tall conclusion you have to make is that there's nobody coordinating the expenditures from these various funds, which seem to be directed at the same purpose. But there's no, you know, what do they all send a check to a central place? No, they don't do that. They spend it in little pieces and there's no plan at all. So query, I mean, I don't want to take you too far off the track, but what what is a good way to do this? I mean, to have four or five taxes or more on on a barrel plus the gross sex tax, isn't there a better way to tax a gallon or a barrel of gas? Isn't isn't a better way to tax it and then and then apply it? Well, actually, I would just apply it to the general fund because the existence, you know, you you complain that the existence of a special fund, you know, allows for money to accumulate when it shouldn't. But that's actually right. But the flip side of that is the existence of a special fund doesn't allow you to spend what you need to spend in order to achieve a stated legislative goal. Well, I don't want the spending to be limited by the special fund either. I if the if the government wants to do something in the environment, let them do it and take the cost out of the out of the general fund. Yeah, that's that's how it's supposed to work. Yeah, I mean, all of our money is supposed to go to go to one general fund. The legislature has its power of appropriation and they are accountable to the people because they got to go face the electors every, you know, every two or four years, as the case may be, including this one where everybody has to go face the electors. So, yeah, there's some accountability. I mean, we'd rather have that, I think, than, you know, some department head who gets appointed and and stays around for four years or eight years and and really is accountable to nobody except the governor, really. Yeah, so that that that person may not spend anything just let it sit there, which and that's that's that's that's what's happened in some cases. Yeah, so including the Department of Transportation. Now, funny that we mentioned the Department of Transportation because they are also planning another attack on those of us who go to the pump. It's called the road usage charge. If you if you want to see what that is, there's actually a website called hiruc.org for Hawaii road usage charge. It's maintained by the Department of Transportation. And what they want to do is they want to they want to replace some of the some of the taxes that are that are in the pump currently with a road usage charge. And the way that would work is like, especially for electric vehicles, you know, alternative fuel vehicles and stuff like that, they don't pay the gas tax now or they pay they pay far less of it. OK. And and the Department of Transportation is concerned that they're not getting their share of gas taxes, which which they spend, by the way, out of the electric vehicle and alternative fuel vehicle users. So if I was an ordinary person and ordinary person on Bishop Street and you ask me where the road usage charge would go, I would say, well, it sure doesn't go to the potholes. It doesn't go to keeping, you know, maintaining the infrastructure. I can't imagine where it goes because we're losing the war on potholes all over the place. So where does the road usage charge go? Well, we don't know because we haven't adopted it yet. In in prior administrations, the Department of Transportation has trotted out, you know, lists of you know, highway improvements that they want to do, like, you know, highway widening or additional lanes here or an additional bypass there. And and and they and they in some years have said, well, look, you know, we don't have the money. So all these new projects are on ice. We're not doing them. We we only have funds to maintain what we got. So we'll maintain what we got in a questionable that that may be. And we're not doing anything new. So with the road with the road usage charge, they're thinking, well, we can do some, you know, some stuff that's new. Now, the idea behind the road usage charge was that it was supposed to replace the gas tax. OK. But but I'm not so sure because in this past legislative session. They they proposed a road usage charge on electric vehicles. That would not replace the gas tax. It would have been it would have been imposed in in in in lieu of you know, vehicle rich, the vehicle registration fee. And and so, you know, I was jumping up and down and I was saying, but the hell's going on here because because you guys promise that you're going to do this in lieu of the fuel tax. And and then they kind of, you know, hemmed and hot and well, you know, these these electric vehicles are not paying the fuel tax anyway. So, you know, what's the difference? But, you know, it sounds like we have a really serious government culture problem here is that every department wants to feather its own nest, every department wants to gather its rose buds while you may. Every every department wants to have a special fund and ample reserves to do what it might come up with, because it doesn't trust the executive to give it money out of or the legislation to give it money out out of the general fund. So they're all like like holding it close to the vest. It's almost it is it's competitive among the departments. This is a very much so a serious attitude problem, a culture point in Hawaii state government. Is this yeah, it's always been like that doesn't exist in other states. I mean, to a greater or lesser degree, perhaps. But I think, you know, in our state, it's blown way out of proportion. I mean, the amount of special funds we have is astounding. So this will this will result, presumably, in a road, a road use tax on top of all the other taxes that the Department of Transportation gets. Yeah, I mean, like for an exam, for an example, you know, I was in the Hawaii Road usage charge advisory committee that the Department of Transportation set up just, you know, I just just basically joined so I could see what was going on. And and one of the, you know, the simulations they did, was to say, OK, well, you know, give all of all of us your your car data, and then we'll calculate how much road usage charge you would have to pay or not pay. And so and so I did. OK, fine. So here, you know, here you go. And I drive a hybrid. OK. And so they and so they come come back with a print out saying that I'd be required to pay, like, you know, eighty five dollars more. Because you drive a hybrid because of driving a hybrid. Because you drive a hybrid because you drive a hybrid. Well, wait a minute. Isn't a hybrid attractive from a policy point of view from an environmental policy point of view? Why would they tax you extra for a hybrid? Because it'll pay enough fuel tax. Now I got it. So one tax is supposed to incentivize you to buy a hybrid and the other tax is supposed to be incentivized to buy you to buy a hybrid. So the whole thing neutralizes itself and winds up at zero. Yeah, you have that's that's that's another, you know, a very interesting feature about the taxes that are being proposed. They're at cross purposes, right? You have you have the car, the environmentalists who want the carbon tax and they're thinking this road usage charge is a horrible idea. And then you have the the people in the Department of Transportation, they're pushing road usage charge to to have a more equitable distribution of costs among the people who are using the highways and byways. You know, it strikes me that the governor should be handling this and coordinate all those agencies work for him or all those agencies should be coordinated and they are clearly not. Yeah, they're fighting each other. Great. Well, on top of this, I mean, lest we forget we we're going to have a serious increase in gas because of what's going on in Ukraine. It's going to continue. It's going to get worse. I mean, every day I look at the New York Times, the Washington Post, and it tells me the war is still going on and it's not going to get settled any time soon. And Mr. Putin is relentless. And so, you know, the question I put to you is if we if we keep on paying more at the pump between these gas taxes, various gas taxes and the price of oil coming into the state and the GT and the GT. Right. Percentage of that. Well, where where does that take us in terms of our economy? I mean, I really want to say the economy will tank, right? I know that that would be horrible. I'm sorry you didn't say that. Yeah, it was implicit. Yeah, yeah. But but no, that there there are, you know, these are what we call market externalities, right? I mean, they are independent of how the market works. So in irrespective of supply and demand, you know, irrespective of the normal market forces, that there are all these taxes to advance social policy. So, you know, is it a good idea? You know, there are various viewpoints on that. You know, we just we just want to see a system with transparency that that, you know, people know how much is how much taxes are going into that gallon of gas. And they are, you know, and the people who make those determinations are accountable to the people because they should be. I think you're being too kind. Really, I think somebody up there, the executive or maybe some leader in the legislature could coordinate these things and clean it up. So we not only know, but it's good policy. You know, it advances the stated policy of the state of Hawaii. We're not doing that. Yeah, we're not doing that. I mean, why stir up trouble, right? Especially in an election year, right? Exactly. So that those that's that's the problem we've got. Yeah. OK, well, why don't you make a closing statement, Tom? Why don't you address your statement to the Hawaii legislature and tell them what they need to do? I guess it would be next year, starting January. Yeah, no, I mean, what we really want to see is more transparency in this, you know, how much you pay at the pump deal. So you know, enough of these multifarious taxes, let's do just one tax if you want to do one tax and explain what it is so people understand it and and then stop hiding stuff because if that's that's bad policy to hide stuff. Yeah. And if you want to incentivize electric vehicles, then do that. Don't give me an ambiguous message and whether you like them or don't do that. Give me a tax credit on electric vehicles and don't punish Tom. It's not fair. Thank you, Tom. Tom Yamachika, president of the Tax Foundation of Hawaii. Thank you so much for joining us today. Pleasure to be here. Thank you and a lot. Aloha.