Posted on: Thursday, June 19, 2003
ISLAND VOICES
Governor not waging war on high tech
By Rep. Galen Fox
State House Republican leader
The Lingle administration is seeking to make Act 221 work as intended — support Hawai'i's high-tech firms.
It makes no sense for lobbyists to say the governor is "waging war ... against the tech and business community." In fact, by ensuring aid goes only to high-tech firms, she strengthens high-tech long-term.
Act 221 needs common-sense changes. For one thing, it's not creating jobs. State Tax Department data shows qualified high-tech companies paid $1.5 million less in wages last year than the year before.
Act 221 states its provisions should be "liberally construed," but these words cost the state millions. The producers of the film "Blue Crush" walked off with $15 million of taxpayer money, yet left no permanent jobs behind here. Had the 1995 megabomb "Waterworld" been filmed in 2002 using Act 221's "liberally construed" tax credits, Hawai'i would be out $150 million. That's $150 million needed for school repairs, for funding the University of Hawai'i, for combatting "ice," and other critical needs.
Act 221 has three other weaknesses. It doesn't focus on what actually constitutes a high-tech operation. Just using computers shouldn't qualify. The act fails to demand that companies receiving credits should remain in Hawai'i while creating new jobs. Finally, the research credit provides little accountability and offers no incentives to expand research projects.
During the past session the governor, helped by advice from experienced venture capitalists, worked with the Senate to eliminate Act 221's "liberally construed" tax benefits and other loopholes. The House disagreed with the Senate amendments. While ordinarily a compromise-seeking conference committee would have settled the differences, House Democrats instantly killed the governor's amendments using the parliamentary stunt of refusing to appoint conferees.
On the Legislature's final day, House Republicans sought at least to debate Act 221 but were rebuffed by the speaker.
Why were House Democrats so adamant about not even discussing changes to Act 221? Republicans are suspicious House Democrats cut a deal with the lawyers, accountants and others who profit by creating tax shelters using Act 221's generous benefits.
