State won't release cost of tax breaks to public
By Sean Hao
Advertiser Staff Writer
The state Department of Taxation says it doesn't have enough faith in its latest estimates for the cost of a myriad of tax breaks, including Act 221, to release them to the public.
That was one of several reasons the department cited in denying an Advertiser request this week for tax credit projections for fiscal 2004 and beyond. Disclosing the figures, which play a key role in tax-collection forecasts and shaping the state's budget, would disrupt the free flow of information between the Department of Taxation and the Council on Revenues, said Tax Director Kurt Kawafuchi.
Kawafuchi also said it is up to the Council on Revenues, which uses the figures in its revenue forecasts for the state's budget, to release the data. The council denied a similar request, in part because the numbers are not discussed in public or included in its final report to Gov. Linda Lingle.
Tax credit projections, which affect how much money will be available for a host of government services, including healthcare and education, have been released in previous years.
In addition, the department routinely estimates the cost of proposed tax credits in testimony before the state Legislature.
Lack of information on tax credits, including the names of companies claiming millions in Act 221 technology credits, has complicated the debate over whether the tax breaks actually benefit the state. Besides tax credits to spur development of the technology industry, the state offers tax credits for home and hotel construction and remodeling, film production and certain kinds of equipment purchases.
A key lawmaker said the department needs to be more consistent in selecting the kinds of information it releases and deciding on how it is released.
"If they don't believe their own numbers, they should say that out front and say that about all their numbers," said state Rep. Brian Schatz, D-25th (Makiki, Tantalus), chairman of the House Economic Development and Business Concerns Committee. "(Or) if they don't believe their numbers, they shouldn't release them to the public. They need to apply a policy across the board."
In a letter rejecting the newspaper's request to provide estimates for future tax credit costs, Kawafuchi said the figures are "subjective, personal, preliminary opinions" of his department's staff that represent "a best guess."
The Council on Revenues also denied a similar request for the figures, which "could be misconstrued by the public as being part of the council's final conclusions," Chairman Michael Sklarz said in a written response to The Advertiser. Also, he wrote, the public would lack information needed to properly evaluate such forecasts.
The state has previously released information on the estimated costs of the credits. According to a projection provided to the public last spring, the fiscal 2002 costs for tax credits amounted to about $89.3 million. The Department of Taxation also projected that the cost of tax credits would soar to $180.1 million in fiscal 2003, which ended June 30, then drop to $159.4 million in the current fiscal year.
Without such figures, the public has no way of knowing how much the tax-break programs are expected to cost in the future, said Lowell Kalapa, president of the nonprofit Tax Foundation of Hawai'i. The numbers are important because the rising cost of tax credits may be one reason why state tax collections are running behind expectations, he said.
"These are the monies that you need for the state to pay for prisons, to pay for schools," Kalapa said.
Kalapa said that while the projected cost of tax credits should be public, he agreed that Department of Taxation estimates for the cost of tax credits are probably unreliable. It's hard to predict how many individuals or corporations will claim a particular tax credit, he said.
"I think they're taking their best guesstimates," Kalapa said.
"There's reticence in signing off on that."
Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.
