Tuesday, December 31, 2002


Ray Kamikawa saw positive potential for Act 221.

Ex-tax director pushed
high-tech investment

By Lyn Danninger

Act 221, a state law providing tax credits to encourage investment in Hawaii high-technology businesses, has attracted both cheerleaders and critics.

Ten who made a difference
The Star-Bulletin is spotlighting 10 people who have made a difference in the community during 2002. This year's 10 is a diverse group but all have one thing in common: Each had a devotion to their cause and made a profound impact on Hawaii.

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While some applaud the measure as a way to encourage new business, others question its benefits, particularly after the movie "Blue Crush," which cost $32 million to produce, received about $14 million in tax breaks under the act.

Many of Act 221's supporters credit former state Taxation Director Ray Kamikawa as among the first to see its positive potential.

"What Ray provided was the vision and the leadership, as well as the technical expertise," said Bill Spencer, president of the Hawaii Venture Capital Association.

"I think he understood better than anyone the need to do something dramatic that would shake out some local investment," Spencer said.

Kamikawa said bold action was required.

"There was nothing else out there I could see that could leverage Hawaii's scarce resources as much as could be done with technology," he said. "Hawaii's high cost of living and other limitations made it difficult in my mind to attract these industries without dramatic incentives."

John Chock, executive director of the state's Hawaii Strategic Development Corp., credits Kamikawa with coming up with what was needed. Act 221 is "highly successful in attracting early-stage investment for qualified high-tech businesses," Chock said.

Spencer estimated that Act 221 has attracted about $30 million to $32 million to the state, and believes the investment will increase next year. The exact amount of investments resulting from Act 221 is not available, but Spencer said his group is working on a report to better identify the benefits.

Others doubt the law is beneficial.

One critic, Lowell Kalapa, of the Tax Foundation of Hawaii, described it as "vague and so poorly drafted that it's subject to interpretation." He noted that there have been more than 200 businesses that have had to ask for clarifications about eligibility for tax credits.

Kalapa said the state has granted more than 100 requests for credits, but the approvals are based on hypothetical projects and numbers.

"It will be difficult to track and ascertain what the impact will be," he said.

Kalapa also pointed to similar findings by the Tax Review Commission, which conducts a constitutionally mandated review of the state's tax structure every five years. The commission's report also called the language of the act vague.

Kamikawa, now an attorney in private practice, is not worried about the criticism. Many issues raised will be worked out over time, he said, and crafting legislation that is too narrow can defeat its intended purpose.

"No legislation is perfect," Kamikawa said. "The ambiguities can be resolved though administrative guidelines. So many times, we are satisfied with doing things on an incremental basis when what we need is bold action."

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