Friday, April 23, 2010

 

Hawaii lawmakers dealing with questions of high-tech vs. economic recovery


by Larry Geller

The State Legislature will act on two bills next week that affect so-called high-tech tax credits. You still have time to weigh in on them. You can bet that corporate interests are already doing so. One way or the other, your emails can make a difference.

Although I don’t know details of their deliberations, lawmakers have so far also declined to divert money to Governor Lingle’s darling deal with NASA for $138,000 that would pay for exactly one job in Hawaii. That expenditure is not in the budget, according to this AP story.

The bills you can weigh in on are SB2401 and SB2001. The first is a temporary suspension of the high-tech tax credits. The second “Extends the tax credit for research activities for one year. Repeals the technology infrastructure and high technology business investment tax credits effective May 1, 2010.”

If you have a position for or against these bills, send emails or call your legislators before Tuesday, April 27, when the conference committee should decide their fate. You can send to all legislators using sens@capitol.hawaii.gov and reps@capitol.hawaii.gov . Or, the conferees are House: M. Oshiro Chair; Chong, Choy, M. Lee, Ward, and Senate: Kim, Chair; Fukunaga, Co-Chair(s); Kidani, Kokubun, Hemmings.

As regular readers of this blog know, I have argued against offering high-tech tax credits without a comprehensive economic plan in place that will assure companies remain here when the handouts expire.

I wrote in Time to drop Act 221 and use the money for social services and job creation (2/9/2009)

For incentive tax credits to work, they have to be accompanied by structural changes. That is, unless we taxpayers intend to subsidize these private companies forever, when the tax credits are over, there has to be something different about Hawaii that causes high-tech companies to want to stay here. Otherwise, guess what—they’ll be making plans to leave even before the handouts end.

Sure, there is some high-tech here, it would be strange if there were none, but we should not count any program that needs Act 221. If it can only survive with tax credits, we don’t need to have it. We can’t afford it.

There are many good reasons (location, location, location are three) why Hawaii will not be the high-tech center of anything, with a few possible exceptions. It is still necessary to bring in parts and talent from elsewhere. Aside from the military, we lack access to customers. Meanwhile, other areas of the world are looking more attractive.

Ok, so we provide tax credits, and it works for some companies. They stay here. Maybe they create jobs in Idaho, though, instead of in Hawaii. There’s nothing we can do about that now. Their management does whatever is necessary to qualify for the tax breaks, they go surfing in the early morning and after work, but create jobs and build their products in factories on the Continent.

One after another company has left Hawaii. It’s a parade of companies that were once the darlings of our high-tech promoters. Each leaving, one after the other, as the siren song of success called them to more suitable locations.

And in Disappeared taxes: Giveaway for high-tech is probably a huge waste of our money, but who knows? (10/7/2006)”

If all Hawaii offers is tax incentives, it's unlikely that corporations will stay. Of course, they'll stay as long as we taxpayers offer them a handout. Who wouldn't? Turn off the money spigot, and what will keep them here? This question has to be answered for each and every company, or they should not receive the tax incentive in the first place.

DBEDT has a history of spotlighting new high-tech companies at the beginning of their life cycle. The latest wunderkind is splashed across the daily papers. Down the road the bean counters do come knocking, and the company leaves, or their stock sags. One after another. Recall all the hype around that real-estate project dubbed the "Mililani High-Tech Park." The bean-counter knock came for one star tenant after another.

The NASA deal lauded in the press would certainly be a good thing for UH and for some students but would be unlikely to result in many jobs in Hawaii. To be employed in the aerospace industry most graduates will have to go to the Mainland, where the jobs are located. If this reasoning is correct, then questioning an expenditure of $138,000 for this project seems very reasonable, given the current budget crush.

Think of all the other purposes to which $138,000 could be put.

 




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