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Friday, March 31, 2000

Legislature 2000


Experts debate
value of tax credits


By Richard Borreca


Once they were strictly forbidden and then thought too expensive, but today tax credits are considered the modern, effective way to ensure prosperity.

Tax credits are not only for the rich. Allowing low-income taxpayers making below a specific wage scale to get a credit, or to pay lower taxes for investing in their economic futures, are considered ways to help poor people get off welfare.

Others, however, look at the credits as artificial props for businesses that should be able to stand on their own.

"Tax credits that end up to be nothing more than subsidies should not be adopted," warns Lowell Kalapa, director of the Hawaii Tax Foundation.

And Republican Sen. Sam Slom maintains he is opposed to tax credit for specific individuals or groups seeking an exemption.

"If a bank or an airline says the tax is a burden, then it is a burden for everyone in the industry and it should be applied across the board," Slom said.

"Why should you single out a specific company?" he asked.

When the Legislature opened in January more than 50 bills to reduce taxes through credits were under discussion, today only about a dozen tax credit bills are still moving through the legislature, although tax breaks are tucked into other bills.

Although the Cayetano administration only supported a tax credit for major hotel renovations in Waikiki, it is backing other bills to give tax credits to high-tech companies starting a local business.

"There is a change in approach," Ray Kamikawa, state tax director, says.

"We need to match what other states are doing in tax incentives and we have heard from industries that they are critical to their needs for expansion or retention of business and competitiveness."

It is difficult to add up how much money the tax credits will cost the state.

Sens. Andy Levin and Carol Fukunaga, who head the Ways and Means Committee, say that although it costs the state tax revenue to give a company a credit for moving here, the state would not get any economic benefit if the firm didn't come in the first place.

"One credit we didn't realize would be important, is not taxing the income on stock options for officers and directors of new companies, but that is proving to be a key reason for companies to move here," Fukunaga said.

Good intentions alone, however, are not enough to get a tax break.

For instance, a bill to give $20 in tax credits to persons who took a CPR class didn't make the cut.

"People are learning to do CPR to help save lives, not to get $20 taken off their taxes," Kalapa said.

When tax credits to lure businesses to a state became popular 20 years ago, then Gov. George Ariyoshi argued against them, saying that businesses that could survive without government help were the ones Hawaii wanted.

Later, when the state was running a half a billion dollar surplus under Gov. John Waihee, tax credits were freely handed out to help the poor and to appease critics who saw the general excise tax as a tax on basic necessities such as food and medicine.

But when Gov. Cayetano took over, the state was in a recession and couldn't afford to give tax money back, so many of the credits were repealed.

"There were economic concerns, we had to address the fiscal needs of the state," Kamikawa said.

Today bills that would give tax credits to the poor, allow new high tech companies to sell unused tax credits and even give property owners a credit for keeping plantation irrigation systems working are all under consideration.

The plantation measure has support because plantations that once depended on elaborate irrigation systems to water their pineapple and sugar cane fields now have no crops and their water systems are falling apart. But the general public still needs the water to be moved and others say the irrigation systems protect developed areas from flooding.

Also still alive is a bill that would exempt airlines from paying back taxes owed for leasing planes from Mainland firms. Lawmakers say the bill would help airlines hold down the cost for passengers and cargo moving between the Islands.

"Basically, we are very supportive of incentives that will make Hawaii business friendly," Sen. Levin said.

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SELL IT, SAVE IT: The House Judiciary and Hawaiian Affairs Committee passed House Concurrent Resolution 87 and House Resolution 80 urging the owner of the Honolulu Star-Bulletin to continue publication and actively seek a buyer.

Richard Port, of Save Our Star-Bulletin, told the committee, "The elimination of one of our two statewide daily newspapers will adversely affect the quality and perhaps even the quantity of news coverage."

Port said the support of the House would "go a long way towards demonstrating the support of our entire state for the continuation of publication of the Honolulu Star-Bulletin."

Thirty-four of the 51 members of the House signed both resolutions.

Beverly Keever, a professor of journalism at the University of Hawaii at Manoa submitted testimony about "the need for diverse points of view in news and editorial content."

Wayne Cahill, the administrative officer of the Hawaii Newspaper Guild, said, "About 85 workers will lose their jobs if the newspaper closes."

The Senate Commerce and Consumer Protection Committee was expected to hear a similar resolution this morning.

CAUTIOUS CAUCUS: The state Legislature's Hawaiian caucus says they differ with the Office of Hawaiian Affairs on efforts to create a private entity to hold its trust assets until there is a recognized Hawaiian nation.

They say given the present legislative timetable, such hasty decisions of this magnitude could "open the door to a host of unforeseen ill effects."

Members say the decision on how to protect Hawaiian trust assets cannot happen in a vacuum or with OHA as the lead proponent.

"There needs to be open discussion and consultation with our Hawaiian peoples," they said.

The caucus, in a statement yesterday, said OHA and the Department of Hawaiian Home Lands should organize a conference discussion within the Hawaiian community about what native leaders should do about the future of the trust.

Members of the caucus are Reps. Lei Ahu Isa (D, Liliha), Ezra Kanoho (D, Lihue), Emily Auwae (R, Makaha), Bertha Kawakami (D, Hanapepe), Michael Kahikina (D, Nanakuli), Hermina Morita (D, Hanalei), Sol Kaho"ohalahala (D, Lanai) and Sen. Whitney Anderson (R, Kailua).

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