As one of many who helped craft the 2001 act, former state tax director Ray Kamikawa, now a tax practitioner, shared some of his thoughts on the dispute surrounding the tax credits after addressing a small group of business people last night.

The cost of Act 221 and benefits to the state's technology industry have been debated, with Gov. Linda Lingle pushing for tighter qualifications and high-tech representatives defending the credits as necessary to grow their industry and diversify the economy away from tourism.

Kamikawa said the source of the criticism is the state's tight budget situation and not the program itself.

"This credit would not be an issue were it not for the revenue situation and the government should look at cutting costs and creating efficiencies," Kamikawa said.

Among the areas where money could be found is in other tax credits such as the capital goods excise tax credit, which could cost the state $25 million this year, or the residential remodeling tax credit, which is expected to cut $60 million from state coffers.

"These do not generate the same kind of excitement that two-two-one does," Kamikawa said.

Act 221 is expected to cost the state $48.4 million in fiscal 2003. That was one reason Lingle lobbied lawmakers, unsuccessfully, to reduce the research tax credit portion of the program. She's also directed the tax department to clamp down on alleged abuses of Act 221, which also provides a 100 percent tax credit for investments in technology companies.

Kamikawa said he approved of the crackdown, and acknowledged that some tweaking of the act may be needed. However, he added that the state needs to provide more complete information about the abuses of the credits and how it came up with the projection that Act 221 costs will soar to an estimated $76.7 million in fiscal 2005.

Part of the controversy surrounding the act comes in trying to identify its original intent. While Act 221 is known as a technology-industry incentive, it's being applied to a whole host of companies including nonprofits, tour operators, travel agencies and financial institutions. Kamikawa said Act 221 was never meant to be limited to the high-tech industry.

"The law speaks for itself," he said. "It was to help technology companies and innovation, and to draw capital into Hawai'i and help non-tech companies that interact with tech companies."

Act 221 will expire at the end of 2005.