Posted on: Monday, March 26, 2001

New Economy tax bills must not be left behind

While there is some disagreement between state officials and the local high-tech industry over a package of so-called "New Economy" incentives, the good news is that the bills remain alive and well.

It is crucial that the state continue its efforts to create a climate that encourages economic diversification and a shift into the information age.

Staff Writer John Duchemin reports that state officials, while supportive of the concept of high-tech incentives, fear that some of the bills would "cost" the state too much in lost tax revenues.

For instance, one bill would give tax credits to existing Internet service providers that might be worth as much as $4 million a year.

It makes sense to move slowly on this one, and not just because it hurts state revenues. The idea behind the New Economy bills is to create economic activity where it does not currently exist.

Hawai'i has its share of Internet service providers already with brisk competition clearly evident. If there is market demand for more service, you can be sure someone will step up to provide it.

But other measures, including those which offer some tax protection for companies willing to risk capital on long-shot ventures, make good sense.

An important point here is that building incentives to new industry is not just about tax loss, it is also an investment that can and should pay off in tax gains as Hawai'i's economy diversifies.

With the prospect of expensive new public worker contracts breathing down their necks, it is understandable why some lawmakers may not want to entertain any measure that has a tax "cost."

But it would be shortsighted to succumb to such fears. In the long run, the only hope for a healthy state economy that produces enough taxes to pay its government workers well is one that is diversified and growing.

That's what these bills are all about.