EDITORIAL
Our economy needs high-tech tax breaks

Hawai'i's Act 221, which offers generous tax breaks to high-tech companies, is one of the more innovative economic revitalization efforts to emerge from Gov. Ben Cayetano's administration.

So it's disappointing to hear critics say the law is so broad and loosely worded that it's easy to exploit as a tax shelter.

Some companies, for example, have tried to spin off their data-processing centers as separate technology companies, thus getting taxpayers to finance their normal operating costs, according to a report by Advertiser high-tech writer John Duchemin.

But such cases are the exception rather than the rule. And we are optimistic it will stay that way if the Legislature tweaks the law to remove the loopholes and narrow the definition of who qualifies.

Like many others, we have high hopes the law can draw investors to Hawai'i and help struggling startup companies obtain the money they need to, well, start up.

But it may be too easy to qualify as a high-technology business under Act 221, and that attracts carpetbaggers and other opportunists. For example, the producer of the successful movie "Blue Crush" qualified as a high-tech business and then left the state shortly after filming ended.

Moreover, there are are just two tax officials assigned to dealing with dozens of requests for tax breaks. Cleary, more gatekeepers are needed.

If lawmakers do a good job of fixing Act 221, we'd like to see it promoted more forcefully on the Mainland and overseas. After all, if you've got it, flaunt it. So let's get it right.