Sunday, July 12, 2020
Hawai'i Free Press

Current Articles | Archives

Sunday, March 02, 2014
Well Then, How Do We Stimulate Business?
By Tom Yamachika @ 4:01 AM :: 2827 Views :: Tax Credits

Well Then, How Do We Stimulate Business?

by Tom Yamachika, Interim President, Tax Foundation of Hawaii

A few weeks ago this column spoke out against tax credits. Not so much because we didn't believe in the worthiness of the causes the credits were trying to support. Far from it. But we were trying to caution folks about the way it's done. No one wants our government to be taken to the cleaners...especially if we all are going to be picking up the tab when the smoke clears.

“OK, Mr. Wise Guy,” you might say. “We have business here, and it’s hurting, so tell me how government can stimulate business short of handing out taxpayer money to the business (which is not allowed under our state constitution).”

All right, then let me talk about a program that has been around for a while. It’s called the Enterprise Zone program.

The objective of the program is to get people employed in parts of the state with high unemployment. First the counties take a look at their lands and they apply to DBEDT for zones. Once the zones are approved, then businesses apply to the program and commit to increase the head count within the zone. The businesses get incentives for a seven-year period, including a credit for income tax due to eligible activity in the zone; a credit for unemployment tax for the same activity; and a general excise tax exemption for the same activity or for construction within the zone. The income and unemployment tax credits taper off over time. Each business sends in a report to DBEDT annually, and that agency verifies that the head counts are indeed rising. If there’s no report or the head count goes south, then there’s no credit for that year.

Here are some of the features of this program that some of the others might lack. The objectives are clearly known and the credit recipients commit to the objectives. The tax relief is substantial at first, but tapers off and stops at a time certain. In that way we do not permanently subsidize an inefficient business. Although the business gets a kick-start, the amount of aid tapers off and weans the business off the credit system so it can compete in the market normally. In the meantime, the business submits relevant data to maintain itself in the program, and that data can be publicly scrutinized to see if the overall objectives are being met. Finally, the business has no incentive to hide the ball. It needs to come up with the information or its credit doesn’t get approved.

Contrast this with the infamous Act 221, the high-tech investment tax credit now expired. This credit awarded people 100% of the amount they invested in a qualified high-tech business over five years. In the beginning, people only needed to claim the credit and there was no precertification process. Legislators asked DOTAX to provide them data about the credit, but DOTAX didn’t have it; their system was not set up to capture the detailed data the legislators wanted. As the State Auditor then stated, the credit law didn’t contain any goals or performance measures to effectively measure the credits. Given that less that 3% of the tax credit claims were audited, some people reportedly took liberties with the facts and claimed some credits to which they weren’t entitled. The credit resulted in $1 billion in lost revenue, and the state could not tell whether the credit was effective.

Want to stimulate business? Fine. But remember the saying by George Santayana: “Those who cannot remember the past are condemned to repeat it.” Stimulus is fine, but it should be temporary, with clear, measurable goals, and it should provide a way for the business to be weaned off it so its global competitiveness does not suffer.

- 30 -


TEXT "follow HawaiiFreePress" to 40404

Register to Vote


808 Silent Majority

808 State Update AM940


ACA Signups Hawaii



Alliance Defending Freedom

Aloha Life Advocates

Aloha Pregnancy Care Center

American Council of Trustees and Alumni

American Mothers of Hawaii



Antonio Gramsci Reading List

A Place for Women in Waipio

Astronomy Hawaii

Audit The Rail

Ballotpedia Hawaii

Better Hawaii 

Blaisdell Memorial Project

Broken Trust 

Build More Hawaiian Homes Working Group

CAFR Hawaii

Castaway Conservative

Children's Alliance Hawaii

Children's Rights Institute

Christian Homeschoolers of Hawaii

Citizens for Recall

Cliff Slater's Second Opinion

Coffee Break

CSIS Pacific Forum

DAR Hawaii

DVids Hawaii

E Hana Kakou Kelii Akina

E Māua Ola i Moku o Keawe

Farmers For Choice Hawaii


Fix Oahu!

Follow the Money Hawaii

Frank in Hawaii

Front Page Magazine

Frontline: The Fixers

Genetic Literacy Project

Get Off Your Butts!

God, Freedom, America

Grassroot Institute

Hawaii Aganst Assisted Suicide

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii Coalition Against Legalized Gambling

Hawaii ConCon Info

Hawaii Credit Union Watch

Hawaii Crime Victims' Rights

Hawaii Crop Improvement Association

Hawaii Debt Clock

Hawaii Defending Marriage

Hawaii Defense Foundation

Hawaii Family Advocates

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii Firearm Community

Hawaii Fishermen's Alliance

Hawaii Future Project

Hawaii Gathering of Eagles

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii March for Life

Hawaii Meth Project

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Right to Life -- Big Island

Hawaii Right to Life -- Oahu

Hawaii Shield Law Coalition

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together

Heritage Foundation

HI Coalition Against Legalized Gambling



Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Homeless Crisis

Honolulu Navy League

Honolulu Traffic

Horns of Jericho Blog

House Minority Blog

House Republican Caucus YouTube


Hump Day Report

I Vote Hawaii

If Hawaii News

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

Iowa Meets Maui

Jackson v Abercrombie

Jihad Watch

July 4 in Hawaii

Kahle v New Hope

Kakaako Cares

Kau TEA Party

Kauai Co GOP

Keep Hawaii's Heroes


Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Malulani Foundation

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

Mauna Kea Recreational Users Group

Middle East Forum--The Legal Project

Mililani Conservatives for Change

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

Muslim Brotherhood in America

NAMI Hawaii


National Christian Foundation Hawaii

National Parents Org Hawaii

National Wind Watch

New Hawaiian

New Zeal

NFIB Hawaii News

No GMO Means No Aloha

Northwest Economic Policy Seminar

Not Dead Yet, Hawaii

Now What I Really Think

NRA-ILA Hawaii

Oahu Alternative Transport

ObamaCare Abortion Hawaii


OHA Lies

Opt Out Today

Pacific Aviation Museum

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Pritchett Cartoons 

Pro-GMO Hawaii


Rental by Owner Awareness Assn

Republican Party -- Hawaii State

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

Save Dillingham Airfield

School Choice in Hawaii

SIFE Remington

SIFE W. Oahu 

Sink the Jones Act

Smart About Marijuana--Hawaii

St Marianne Cope

State Budget Solutions Hawaii

State Policy Network

Statehood for Guam

Tax Foundation of Hawaii

The Harriet Tubman Agenda

The Long War Journal

The Real Hanabusa

Time Out Honolulu

Trustee Akina KWO Columns

Truth About Trade & Technology - Hawaii

UCC Truths

Union Members Know Your Rights

US Tax Foundation Hawaii Info

Valor in the Pacific

VAREP Honolulu

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii