Tax credit mistakes show need for clarity
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It's amazing what you can see when a little light is shed on a subject. And enlightenment is particularly welcome when the subject is the way that taxpayers' money is being spent.
An inquiry by Advertiser business writer Sean Hao has shown that the state is not giving enough scrutiny to its own tax-credit incentive program, which is intended to attract new film production to Hawai'i.
It's an attractive tax credit, increased by lawmakers last year from 4 percent to 15 percent on O'ahu and 20 percent on the Neighbor Islands.
The Hawai'i Film Office has been reluctant to talk about the credit, and state officials declined in September to disclose data on the program's applicants. But, last month, the state Office of Information Practices ruled that the film office could keep some information confidential — such as company production expenses and employment levels — but not all of it.
The Film Office has fulfilled its promise to identify the productions and the companies, revealing that two of the 12 applications covered projects under the state's own Hawai'i Tourism Authority umbrella. Two more applicants were also likely to have done production work in Hawai'i regardless of an incentive.
Naturally, this suggests that the state is giving away some of its tax money without any real benefit accruing to the film industry.
Although the tourism authority has reconsidered its participation, the revelation underscores the need for more transparency in such state tax-incentive programs.
OIP officials were willing to press for more openness in the film tax credit than in the other incentive known as Act 221/215 tax credits, which under law are kept secret.
The public deserves to know more about the beneficiaries of this program, as well. There ought to be a way for the public to know whether their sacrifice of tax revenue to business has been effective in producing jobs and economic growth and diversity.
Lawmakers ought to revisit the wisdom of placing so much faith in having the state bureaucracy performing its own watchdog duties, and look for an opportunity to open the window a crack.