Business of the state

Gubernatorial candidates
offer few specifics about
how they would help

By Tim Ruel

In a recent survey, the top two political issues cited by members of the Chamber of Commerce of Hawaii were:

>> Providing tax relief and/or tax incentives for Hawaii's businesses with a corresponding reduction in the cost of government; and,

>> Increasing the availability of and reducing the cost of workers compensation insurance.

The results, taken from the chamber's "Legislative Agenda 2003 -- Issues Development Survey," are preliminary. As of last week, 314 of the chamber's 1,100 members had responded.

"The bottom line on what we're trying to accomplish here is jobs," said Jim Tollefson, the chamber's president and chief executive. "We're looking for ways that we can improve the business climate of the state, and have jobs saved or jobs created."

The chamber now needs working groups to come up with a specific agenda.


Both candidates support tax credits for specific "growth" industries. When asked about broad tax relief for business, Republican Linda Lingle talks about the need to cut regulations as a hidden tax, while Hirono says she will back a cut in the capital gains tax.

Neither candidate directly addressed cutting the cost of government, though Lingle advocates an audit of the entire state, as well as performance-based budgeting.

The candidates differ on dealing with workers compensation costs, and differ on the success of the state-created Hawaii Employers' Mutual Insurance Co. Democrat Mazie Hirono says much of the high cost of insurance is the result of the stock market's swings, and she pledges to look into systemic changes, though she will not cut benefits to workers. Lingle talks about cracking down on fraud as a major cost driver.

Both candidates say they want to hear directly from businesses about specific proposals.

Lt. Gov. Mazie Hirono


Hirono said she supports tax incentives for specific industries that are new and growing areas of the economy. She wants to market the high-tech tax credits already passed by the state in the form of Act 221, and she said she would also consider tax credits for diversified agriculture.

Hirono has proposed cutting the state's 7 percent capital-gains tax in half, a promise dismissed by her opponent as having been rejected already by the Legislature. Hirono, who has served 14 years in the state House, insists she could make it happen with the help of legislators and has pledged to introduce a tax-cut bill within the first 100 days of her administration.

Hirono rejects cutting the state's broad-based 4 percent general excise tax on goods and services. The tax typically provides more than half the state's total tax revenue. All things being equal, cutting the excise tax to 3 percent would mean slicing more than $436 million from the 2003 fiscal budget, according to recent forecasting.

"It's a lot -- don't forget how much of the general excise tax comes from tourist activity in Hawaii," Hirono said.

"The way it looks, we're going to be facing a deficit, so that's why all these tax incentives ... (have) to be reviewed in the context of the impact on the general fund."

Hirono said she wants businesses come to her with specific requests for relief. "It's an approach that works, as opposed to one side saying, 'Here's what we want.'"

Workers comp

Hirono said she is aware that workers compensation premiums have been on the upswing (some businesses have reported a 300 percent increase this year).

"We just need to recognize that that happens," she said. Stock market losses have cut insurers' investments. Hirono touts her support of the state-created Hawaii Employers' Mutual Insurance Co., a nonprofit set up to stabilize the workers' compensation insurance market. She said she is open to changing the system, without taking benefits away from those injured on the job.

"I would want to balance out how to help the business and make sure the system ... continues to meet its intended purpose in a fair way."

Linda Lingle


Lingle supports tax incentives that encourage development in poor economic areas, such as Waianae, Puna and Molokai. Like Hirono, Lingle also supports the state's high-tech tax credits introduced under Act 221.

"I think the government does have an interest in creating certain kinds of jobs," she said. It's good public policy to favor industries that create higher-salary positions, she said. "It's favoring them. But that makes sense to me."

Lingle supports repealing the state general excise tax on medical services, which will be a boon to health-care providers as well as patients, she said.

Lingle also said she would support exempting federally contracted projects from the excise tax, primarily because of concerns about even-handed enforcement of the tax.

When asked about broader tax relief, Lingle said the best thing government can do is cut unnecessary regulations, which amount to a hidden tax. She wants to hear from businesses before making concrete proposals, though she blasted state government for being unfriendly to business. "Their attitude toward business, I think, has to change," Lingle said.

"You do it by bringing in a team of people that have that same feeling about the role that business plays in the community."

Workers comp

Lingle said one cause of high workers compensation rates is fraud, based on what she has been told by some employers. "They're very upset that people are abusing the system. We have to become more serious about eliminating fraud," she said. She did not elaborate on how this could be accomplished.

Lingle also believes the Hawaii Employers' Mutual Insurance Co. is part of the problem, because other insurers can't compete with it, thus reducing competition. HEMIC insures businesses that cannot find coverage in the private sector.

When asked if she would kill HEMIC, Lingle said she would first ask the insurance and medical industries for guidance. "My experience is they know a lot more about what needs to be done than what the government does."

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