 Aloha, I'm Keely Akina, President of the Grassroot Institute. The best-laid plans, we're told, often go awry, but the saying should come with an asterisk that adds, quote, especially when it comes to politicians counting on revenues from tax hikes. End of quote. Come this November, Hawaii voters will consider whether to approve a state constitutional amendment that would allow the legislature to levy what we call a surcharge on investment real property, ostensibly for the purpose of funding public education, which is a good thing to do in and of itself. But would that proposal work as planned? Good question. Proponents have been vague on which properties would see a tax hike and by how much? We do know, however, that supporters hope it will raise hundreds of millions of dollars a year. Now, this seems like a good time to point out that it's one thing to raise taxes enough to produce a certain amount of revenue, but actual results can vary. Consider the Philadelphia soda excise tax of 1.5 cents an ounce of sugar, sweetened and diet sodas that went into effect in January 2017. The new tax was projected to raise $46 million for pre-K public school programs, but just a few months in revenues were 14% lower than expected, endangering the very program it was meant to fund. In simple terms, the tax changed people's behavior. Soda sales in the city fell dramatically, while just outside its borders, they increased by 38%. Philadelphia residents became 40% less likely to drink soda, choosing water instead. Now, of course, a soda tax isn't the same as a property tax. For one thing, it doesn't encourage higher rents and flight from the city, which brings us to the story of Chicago. In 2015, Mayor Rahm Emanuel proposed a $588 million property tax increase for the purpose of funding Chicago's police and fire department pensions. In a city where high prices had seen many renters paying 50% or more of their income on housing, the property tax hike was considered a catastrophe for renters. Let me read to you what one analyst told the Chicagoist. The bottom line is an increase in property taxes increases the cost of holding the asset, which in this case is real estate. The owner will need to cover that additional cost, and increasing the rent is the swiftest way to do it. Makes sense, doesn't it? Today, Chicago leads the nation in population loss as residents flee to escape the high cost of living. High property costs, pension liabilities, a high cost of living, and people leaving for greener pastures. Now I'm talking about Chicago, but does it sound familiar to us in Hawaii? Defenders of Hawaii's proposed property surcharge say it's intended to apply to only high valued properties. But that doesn't mean you would yield the revenues desired. Evidence shows that people often respond in ways that tax and regulation proponents hadn't anticipated. They learned to avoid the tax. For example, take a look at Hong Kong. In Hong Kong, a premium tax or property tax on millionaire properties incentivized buying homes just below the cap of a million dollars, and then renovating them without reporting the increased value of the property. Our own Carl Bonham, executive director of the University of Hawaii Economic Research Organization, warned the Hawaii legislature that in the case of Hong Kong, the market responded to avoid the tax. This is what Carl wrote, home prices in the 800,000 to 900,000 range suddenly became the hot item. Why does it matter that Hawaii property owners and investors might not respond as anticipated and thus defeat the intent of the education tax? Because the vague wording of the proposed amendment suggests a blank check for our legislature. If the proposed surcharge were to not raise as much money as hoped, the legislature would have to stop at one million dollar homes. There are in fact no limits stated in the proposed amendment regarding which properties could be considered investment, which means that state legislators would have to choose between expanding who gets taxed or accepting that tax didn't raise as much money as planned, which do you think they would choose to do? Ehana Kako, until next time, let's work together. I'm Kaley Akinah with the Grassroot Institute, aloha.