Tax-break bills survive committees
By Sean Hao
Advertiser Staff Writer
State lawmakers kept a number of business tax-break bills alive yesterday as they continued to debate how to boost the economy with a budget that's in the red.
Five tax incentives made progress in the House, including a $5,000-per-job tax credit for companies that create jobs. Another bill that passed its first committee would create up to eight so-called "renaissance" zones, in which certain individuals and businesses would be exempt from income and general excise taxes. The program would be similar to the state's enterprise zones, which do not apply to individuals.
The renaissance program's goal is to spur economic development in such rural areas of the state as South Kona-Ka'u.
Rick Vidgen, president for MacFarms of Hawaii, told legislators that the program would help the nut grower build a visitors center, growers store and a facility to convert macadamia shells into valuable filter material.
He said the macadamia nut industry is suffering from drought, a drop in tourism and the high U.S. dollar, which makes imports a cheaper alternative to Hawai'i-grown nuts.
The proposed projects "would provide jobs and marginal revenues (and) profits for a district and an industry that truly needs your support," Vidgen said. "The tax reduction will improve the economic case for them."
Legislators also approved a tax credit of as much as $5,000 for employers expanding their work force by 10 percent. Participating companies would have to spend two-thirds of the savings on job-training initiatives.
The bill originally applied only to jobs paying at least $39,000 annually to foster the state's high-tech and knowledge-based industries. Yesterday, that amount was cut to $25,000.
"That's actually the level of wages most businesses deal with, so it opens it up for a lot more people," said Mike Fitzgerald, president and chief executive of Enterprise Honolulu, a nonprofit economic development organization. "Right now, we've just got to get people into the work force and get them on the ladder up so they can get those higher paying jobs."
Three more tax incentives also passed the Committee on Economic Development and Business Concerns. These would provide tax credits for large construction projects, job creation and for professional employment organizations.
In several cases, similar bills also are making their way through the Senate. Whether the state can afford the legislation remains a major question.
With Hawai'i still facing a $70 million budget deficit, it's clear the state cannot afford to enact all of these incentives, said Brian Schatz, D-25th (Makiki, Tantalus).
For now, the plan is to push five or fewer bills designed to bring investment capital into the state and help existing businesses, he said.
"We want to try and keep many of these ideas alive," Schatz said. "Of those, perhaps only one or two will pass."
Also making its way through the Legislature is a 10-year, $75 million tax credit for developers of the Ko Olina Resort. It is the only business tax incentive supported by Gov. Linda Lingle thus far.
Lingle spokesman Russell Pang said the governor has not taken a position on any of the other business tax breaks now under consideration by lawmakers.
