Compliments of
Alan Van Zee
President | NMLS #: 297154
Hawaii Mortgage Company, Inc.
Company NMLS #: 232582
Alan Van Zee is one of the top producing Mortgage Originators in the state, originating over $2,000,000,000 to date. He has written and published this weekly newsletter for the past 17 years. It is the most widely read mortgage publication in Hawaii.
Hawaii Mortgage Company, now in our 25th year of providing mortgages to the people of Hawaii, is proud to have a complaint-free history. We make sure our clients are happy!
Mortgage Market News and Insight
For the Weekend of May 10th, 2025
Hawaii’s Most Read Mortgage Publication for 17 Years
Volume 17 – Issue 34
Kissing Great Jobs Goodbye
Hawaii certainly has a major problem with the skyrocketing cost of real estate. I have always advocated that the one way to overcome those high prices is with good paying jobs. Too many of our residents are working jobs that may allow for survival on the mainland, but with the high cost of everything here, very few people can live comfortably in our island state.
Hawaii’s economy cannot grow and flourish when so many residents are paid so poorly. Servers at restaurants, hotel workers, delivery drivers, even the majority of people working state and county jobs aren’t making enough to survive here. $25 per hour used to be a wage many of those hoped to obtain. But $52,000 per year won’t get you very far in Hawaii these days.
But there is one segment of our economy that has consistently provided exceptional jobs with good pay – the TV and Film industry. I’m not just referring to the actors, the most visible of crowd. That industry employs carpenters, electricians, drivers, food caterers, office staff – you name it. And they all make a decent wage. Most people don’t realize that in the TV and film industry there is a schedule of minimum pay for every job you can think of. At the end of a movie or TV show when the credits roll, you’ll see the hundreds of people that production employed. And each position, like the 2nd Assistant Key Grip for example, has a set rate of income.
Hawaii’s TV and film industry employes thousands locally, all getting good pay, and all contributing to the taxes collected to feed our bloated government bureaucracy. Hawaii, like our big sister state California - whom we mimic every move she makes, has taken this industry for granted and has not adapted to the times. Other states and counties realize the enormous benefit thousands of well-paid residents can do to fill government tax coffers. That is why it is commonplace now for states to offer huge tax breaks to production companies to film and produce in their localities. Did you know that more movies are now shot in Georgia than in California?
Hawaii has offered tax credits, but the legislature this session couldn’t get their “act” together and come up with a continuation of a tax incentive plan to keep the industry here. With the recent cancellation of Fox’s HI Surf series, Hawaii for the first time in 25 years has no active productions.
These people need to work. At some point these highly paid people must move to where the work is. With the failure of the legislature to encourage production here, it will just be another blow to our economy.
Sales Tax vs. Excise Tax – The Difference is Magic!
My son at 16, is at that age where he actually took an interest in reviewing a sales receipt. It was for the ice cream I bought him at Costco the other day. When looking at the amount charged for tax, he asked why we have such a weird tax rate of 4.702%. The answer has to do with how Hawaii’s government tries to squeeze as much out of us as possible.
The tax you see on every receipt in our state is an Excise Tax, not a Sales Tax. Excise taxes are calculated on how much a merchant collects from customers. Sales taxes are amounts collected from consumers and sent to the government. Huh?
Sales Tax:
A merchant sells a customer $100 in goods or services. The state has a sales tax of 4.5%. The tax would equate to $4.50. The merchant will collect from the buyer a total of $104.50. At the end of the month the merchant will send the tax collection agency the $4.50 they collected from the customer.
Excise Tax:
A merchant sells a customer $100 in goods or services. The state has an excise tax of 4.5%. The tax would equate to $4.50. The merchant will collect from the buyer a total of $104.50 – just like the sales tax example. But at the end of the month the merchant must send the tax collection agency 4.5% of all monies collected from sales. The merchant collected $104.50. The taxing authority calculates that 4.5% of $104.50 is $4.702. The state gets a bonus of 20.2 cents. That puts the actual percentage of taxes for that transaction at 4.702%. That 20 cents makes a huge difference when you are looking at billions of dollars of commerce.
If the tax rate is 4.5%, where does the goofy tax rate come from?
Merchants and tax reform advocates have long complained that with the excise tax, the state is getting more money than the merchant collected from the consumer. That’s unfair to the merchant. To quiet the complaints of those that don’t know better, the greedy tax people came up with a brilliant compromise: Let the merchant charge the consumers the fully realized tax rate of 4.702%. Now with the extra money collected, the merchant wouldn’t be out any money out of pocket. Right!
This slight of hand changes nothing in how the state collects more than what the consumer paid. No matter how much you add to the consumer, the state will always get more. The tax form the merchant sends in with the tax payment is simple. Step 1, how much money did you collect? Step 2, multiply by 4.5%. Step 3, send it in. There’s no option to indicate the amount of tax collected and to just send that in.
Hopefully you’ve just learned something. My son sure did!
And now the week’s economic news…….
Steady Fed
During a light week for economic data, investors turned their attention to the Fed. There were no significant surprises at the meeting on Wednesday, however, and mortgage rates ended the week slightly higher.
As expected, the Fed made no change to the federal funds rate, and the meeting statement was similar to the prior one. Officials continued to emphasize the high level of uncertainty about the economic outlook due to changes in government policies. The statement also elaborated on the challenge facing the Fed, since higher tariffs could lead to increasing unemployment and higher inflation. If both of these outcomes take place, lower rates would be the proper course to boost the labor market, but higher rates would be called for to fight rising prices. As a result, officials intend to proceed slowly on monetary policy changes to allow ample time to evaluate evolving economic conditions. Most investors anticipate that the Fed will lower the federal funds rate at the July meeting.
The most significant economic report released this week came from the Institute of Supply Management and exceeded expectations. The ISM national services sector index rose to 51.6, above the consensus forecast and the highest level since February 2024. Readings above 50 indicate an expansion in the sector.
The U.S. trade deficit surged to a record high of over $140 billion in March, as companies and consumers rush to purchase goods ahead of potentially higher prices. Global tariffs are set to rise significantly on July 6, although many countries reportedly are working on trade deals and one was reached with the UK this week. Imports of consumer goods also hit a record in March with large increases seen in a wide range of categories including pharmaceuticals, apparel, furniture, and household appliances.
Next Week
Investors will continue to look for additional information about tariff policies. For economic reports, the main event will be CPI on Tuesday. The Consumer Price Index (CPI) is a widely followed monthly inflation indicator that looks at the price changes for a broad range of goods and services. Retail Sales will be released on Thursday. Since consumer spending accounts for over two-thirds of U.S. economic activity, the retail sales data is a key measure of the health of the economy. Import Prices and Housing Starts will come out on Friday.
Until next week….
*** Please note that Freddie Mac publishes their weekly rate report on Wednesday mornings from data received Monday and Tuesday.
The graph above is intended to shown rate trends, and not “today’s current rate”. ***
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