Posted on: Friday, January 17, 2003

'Job creation tax credit' proposed

By Gordon Y.K. Pang
Advertiser Capitol Bureau

A tax credit designed to stimulate job growth in "knowledge-based" industries is being proposed by majority Democrats in the state House of Representatives as part of their legislative package.

The so-called "job creation tax credit" would be available to businesses that increase the number of jobs in their company by 10 percent, with the caveat that the jobs must pay at least $39,000 annually. The initial proposal calls for a tax credit of 3 percent of a new salary, up to $1,500.

While all types of businesses would be eligible for the credit, the target is high-technology or knowledge-based industries, said Rep. Brian Schatz, D-25th (Makiki, Tantalus), who heads the House Economic Development and Business Concerns Committee. "We have to move from a service-based economy to a knowledge-based economy and this job creation tax credit will help us accomplish that goal."

He estimated that the credit would "create thousands of new jobs, high-quality, living-wage jobs." The $39,000 minimum was chosen because it is three times the annual salary of a person making minimum wage.

"The problem for all of us is not that there aren't enough sufficient jobs, it's that there aren't enough sufficient high-paying, high-quality jobs that are knowledge-based and that provide, especially our college graduates, opportunities," Schatz said.

House Minority Leader Galen Fox said that on the surface the bill is something he would favor. "I basically support tax reduction and this is a way of easing the burden," Fox said.

"But I think if you really want to create jobs, the credits or tax breaks have to be substantial. We really have to change the relationship between government and the rest of the economy by shifting money from government to the private sector."

The House Republican caucus earlier this week issued its package, which included a number of tax incentives that echoed those that have been outlined by Gov. Linda Lingle during her campaign. Repeals or exemptions on excise tax for medical services and restoration of a food tax credit are among those proposals.

Democratic leaders noted that Budget Director Georgina Kawamura told Finance Committee members this week that tax incentives in the governor's six-year budget would cost state coffers only $30 million in the upcoming first year.

Schatz stressed that the state needs to be realistic about what it can offer in a tough budget year. "We want to make sure that any tax incentives, tax credits and tax cuts that we undertake have strict accountability provisions," he said.

On the education front, the Democratic Caucus reiterated its proposal to create community-based advisory boards consisting of parents, teachers and other stakeholders from geographically similar schools that would act in an advisory capacity to the superintendent.

Rep. Roy Takumi, D-36th (Pearl City, Palisades), likened the panels to neighborhood boards which, while not having actual authority, have significant influence on government actions.

Lingle and the Republicans have proposed abolishing the existing school board and establishing a multitude of locally elected school boards. Last year, both houses of the Legislature separately approved measures that would have allowed a constitutional amendment on the ballot doing just that, but a joint version could not be hashed out in conference committee.

Fox said he was disappointed that the Democrats had shifted gears on education governance and described the new bill as "tinkering around the margins."

The Democratic package also called for a bill that would give principals a small budget to expedite repair and maintenance.

Other bills offered by the House majority yesterday would:

• Ban government contractors, unions and corporations from making political contributions.

• Install energy-saving devices in state government facilities to cut down on energy use and costs.

• Establish a special task force within the Office of the Attorney General that would assist local police in fighting crime related to the drug crystal methamphetamine.

Reach Gordon Y.K. Pang at gpang@honoluluadvertiser.com or at 525-8070.