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The Honolulu Advertiser
Posted on: Monday, March 7, 2005

EDITORIAL
Tax credit analysis is long overdue

With a flurry of tax credit bills moving through the Legislature, it's fair to question what we're getting in return.

It's argued that tax credits are worth the gamble because the enterprise wouldn't even exist without the tax break, so no existing taxes are lost.

To justify the loss in potential revenue, and in the interest of sound policy, these incentives should be analyzed to ensure there's a clear benefit to taxpayers, such as new jobs or attracting certain industries that would diversify our economy in a positive way.

Today, it's hard to tell whether Hawai'i is benefiting from these credits because no comprehensive review has been done.

That could change if the Legislature passes House Bill 1720, which would require a state tax advisory panel to conduct a biennial cost-benefit analysis of tax breaks and exemptions. The bill is set for a House floor vote this week.

A careful review is sorely needed and would help guide the state in developing a clear, sensible policy on tax credits.

That said, the state departments of Taxation and Business, Economic Development & Tourism have legitimate concerns that the bill might have a chilling effect on those who want to invest in Hawai'i startups because it would make public their names and the tax credit amounts they received.

But a reasonable compromise balancing accountability with confidentiality concerns must be reached. A closer examination of our tax credit system is overdue. HB 1720 is an opportunity that must be explored.