"I think Act 221 is visionary for a State that depends on the good will and generosity of complete strangers who decide to travel here and pay inflated resort prices for a vacation. There is no sustainability in this. What Act 221 needs is a visionary leader to implement it."
scott Since you all asked I would be happy to explain this to you. I have been one of the chief fighters of the proposed amendments and i will outline why in the following statements. First of all you have mentioned abuse. Abuse would describe illegal acts which there have been none. The deals that were approved for tax credits were approved by the tax department under careful scrutiny and are therefore by definition legal and free from the tag of abuse. There are some companies through crooked Lawyers and accountants that have figured out how to take advantage of loopholes in the R&D credit which is not limited to Qualified High Tech Businesses (QHTB's) but availaible to any company that conducts more than 50% of it's stated business in R&D. I am sure that you can see where this would pose problems. For the majority of companies this is not the case and there is no reason to punish those cmpanies for but a few bad apples. If the law was limited as it now is by the recent TIR put out by the tax office, to QHTB's all of the percieved abuses would disappear because a company would actually have to prove that it is conducting R&D to get a comfort letter. As far as movie deals being questionable under Act 221, I agree that the legislature never should have included performing arts in the bill but the language exists and therefore there are no questionable tax credits for movies that come as they are simply exercising their legal right under the law. And remember that each of these credits issued are done so by the tax office under the law. So since the deals are unequivocably legal there can be no abuse. Now, on to the meat of this. Act 221 has been instrumental in creating new employment in our state and we need look no further than Maui to see that. If any of you had read my editorial in the Advertiser on April 16th you would have seen me quote a recent study by the Maui Economic Development Board that show 1,000 new jobs at an average annual salary of $60,000 have been created as a direct result of Act 221 and $40 Million in taxable revenues have been generated. There are not numbers available on Oahu because the present Administration does not want you to see those numbers because there arguments would be dashed if you did. In a preliminary, unscientifc polling we found that there have been 500 new jobs at an average salary of $70,000 have been created on Oahu this year alone and that there have been well over $40 Million in revenues generated because of Act 221. Enterprise Honolulu and HTTA predict 4,000 new jobs by 2006 and several hundred Million in revenue by then. But for some shady companies Act 221 is working exactly as intended and will pay for itself many times over even with the companies that are taking advantage of the loopholes. I personally know of a company that is moving here from New York because of Act 221 and while they are bringing their 30 employess here there will no doubt be more jobs available as they will have the capital through the tax credits to hire more programmers. Act 221 was not designed to bring Intel or any other big company here it was designed to encourage investors to pump venture capital into Hawaii and at this point we have a venture fund looking to locate here. There are several Biotech companies and software companies that are realistically looking to loacate here because of Act 221 but are cautious due to the medeling by the Republicans on the issue. Their arguments for major reform have been baseless and are evidenced by their constant rhetoric about having to cut education and other programs due to Act 221. Generally that is a last resort argument used in liu of facts. The fact is there are many more reasons to leave Act 221 alone than there are to change it. If it is changed now you will scare away investors because if you mess with it now chances are you will mess with it more in the future. Investors like stability and that does not show stability. It has come to a time when we need to bite the bullet and do what we set out to do. We may loose money on the front end but it will be an enormous gain in the long run. There is no reason to give up those long term gains for short term pitfalls. Maddog
