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The Honolulu Advertiser

Posted on: Thursday, February 24, 2005

Raceway tax credit? Give us a break

The Hawai'i Motorsports Center is asking the state Legislature for a $50 million tax credit to finance a new motorsports complex that would replace Hawai'i Raceway Park.

Without the tax break, according to the center's president, Mike Oakland, the facility likely will not be built and speed demons will instead race on O'ahu's freeways.

While this argument is compelling on an emotional level, there is scant evidence to support it.

The case has yet to be made that shows compelling reasons for the raceway tax credit. Does the public benefit outweigh the costs? Does it help diversify Hawai'i's economy in a positive way? And what's to stop other businesses from asking for and receiving similar perks?

Tax credits should be offered to stimulate fledgling industries that diversify the economy and provide decent-paying jobs for residents and incentives to keep and attract homegrown talent.

Given the piecemeal approach of how we now hand out tax credits, one can't fault businesses for trying to get a break.

As Lowell Kalapa, director of the Taxation Foundation of Hawai'i, points out, tax credits were originally designed to alleviate the burden on the poorest among us.

But they've evolved into incentives, and in some cases, rightly so.

Today, Hawai'i offers tax credits to lure film and TV production, high-tech, biotech and other new business investment and jobs to the Islands. They're also given out for hotel construction and renovation, using renewable energy such as solar panels, and are proposed as incentives to build affordable housing and purchase long-term-care insurance.

It's time for the state to set clear and comprehensive guidelines for doling them out. And there are some basic principles that make sense. For example, tax credits should be limited to new enterprises that do not directly compete with existing businesses. And they should be limited in duration, focusing on the "start-up" period, with companies reviewed regularly to see whether they continue to meet their stated purpose.

Clear and consistent guidelines would serve Hawai'i much better in the long run.