Hawai'i residents favor tax breaks to create jobs

By Sean Hao
Advertiser Staff Writer

About three quarters of Hawai'i residents approve of giving tax breaks to companies that promise to create new jobs, according to the latest Honolulu Advertiser Hawai'i Poll. However, nearly half of respondents said they didn't know enough about the technology tax break, known as Act 221, to judge whether it has been effective.

The results — which were similar across all ages, genders and islands — showed 75 percent of respondents favored tax breaks for economic development, with 21 percent disapproving of such tax breaks and 4 percent expressing no opinion.

"I approve because I have a business myself and I hire local people and try to help the economy here," said survey participant Sharon Quesnel, 49, a Hali'imaile, Maui, resident who owns a home cleaning business. "If they're doing something good, they ought to get a benefit, and it might help them to do more things like that."

While most respondents shared similar sentiments, they were less confident about the effectiveness of Act 221, which was intended to bring high-technology jobs to the state. Of those surveyed, 46 percent said they don't know enough about the credits to have an opinion. Another 42 percent said Act 221 was good for Hawai'i, while 12 percent said it was not good for the state.

Act 221 was created in 2001 as a way to diversify the state's tourism and military-based economy. Since then the credits, which based on loose estimates created between 600 and 800 technology jobs in 2002, have come under fire for their high cost and potential abuses.

Bill Cox, 31, a member of the U.S. Marine Corps living in Kailua, supported incentives for the technology industry, even if they may be abused by some. Cox, who was unfamiliar with Act 221, also felt that businesses should be offered tax breaks to create jobs.

"Anything you create, there always will be a loophole for people to abuse it," Cox said. "I assume that if it's something that kids will benefit from ... that it's a good thing."

The state Legislature is considering extending the Act 221 tax credits, which were set to expire next year, for an additional five years. Lawmakers are also considering amending the act to prevent tax dodgers from abusing it.

Though relatively small when compared to the state's two-year $7.6 billion budget, the cost of business tax breaks is rising. In 2002 all general excise tax exemptions, including those that didn't benefit businesses, cost an estimated $380 million.

Income tax credits, including Act 221, cost the state an estimated $180.1 million in fiscal 2003, with $83.2 million of that cost from corporate tax credits and $83.9 million from tax credits for individuals, according to state estimates. The rest of that money was claimed by insurance companies.

Other tax breaks created in recent years include a $75 million tax credit for developers of the Ko Olina resort.

While the goal of all these tax breaks is to create jobs, state officials have little information on the benefits they bring. Like many survey respondents, 70-year-old Doug Mossman, a retired actor and businessman living in Mililani, said he didn't know enough about Act 221 — particularly how well it worked — to know whether it was a good thing.

"I probably don't have enough information, but I have an opinion," Mossman said. "It was a good idea. Has it worked out? I have some doubt."

However, like most of those surveyed, Mossman said he approved of the idea of providing tax incentives to businesses in hopes of creating new jobs.

"I'm inclined to approve the idea provided there are enough safeguards so the people who are applying for it are legitimate," Mossman said.

The statewide survey of 605 Hawai'i residents was conducted March 24 to 27 by Ward Research Inc. of Honolulu. The margin of error is 4 percentage points, which means a survey of all Hawai'i residents would not be likely to produce a result more than 4 percentage points above or below the poll results.

Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.

Correction: A headline on a previous version of this story and a headline on one of the graphics did not accurately convey the poll results.