Turning The Tide of Anti-Business Attitudes in Government

by Lowell L. Kalapa, Tax Foundation of Hawaii

For years, local leaders, both within government and the business community, depended on the umbilical cord to federal funds secured by Hawaii’s Congressional delegation to the point that many of those leaders have no clue on what it takes to insure economic and financial prosperity for our community.

Anytime Hawaii ran into a bump in the economic road, local leaders got on the phone to Washington and asked for a federal bail out. Who needed to worry about how the business climate fared when there was always the alternative of running to the federal government for another splurge of federal dollars for the state, be it on defense spending of native Hawaiian programs. Ah, but with the change in dynamics and the loss of seniority on the “hill,” local leaders, both within government and in the private sector, will have to deal with the apathy of the last 50 years, that nothing has been done to make Hawaii an attractive place to do business.

Oh, that is not to say that Hawaii is not an attraction to global investors like the Japanese of the early 1990’s, but to those investors the obvious attraction was that Hawaii is a great place to make a quick buck because of the public policies such as the law of supply and demand. This is true of real estate which is available for development. In an environment where less than five percent of the total land mass is zoned urban, the value of what is zoned urban can only go up. This is why during the last recession when the housing market in the rest of the country took a nose dive, real estate values in Hawaii hardly declined at all. Certainly there was less activity, but overall the value of real estate in Hawaii did not falter.

But what state and local officials need to recognize is that if Hawaii is to prosper, attitudes and laws governing Hawaii’s business climate must change. When Hawaii continuously ranks at the bottom or near the bottom as a place to do business, one would think that community leaders would do something about changing that perception. For those businesses which are long established in Hawaii, they probably prefer the status quo. After all, they got their sweet spots and don’t want their apple carts upset. What they don’t realize is that unless there is a strong and vibrant community, Hawaii will eventually end up in an economic abyss.

Although political leaders will point to their economic achievements over the last decades, those efforts were nothing but short term fixes about which they could write glowing press releases. These efforts took the form of tax incentives, like tax credits for high technology, that lawmakers promised would attract high paying jobs - high paying jobs that lawmakers turned around and taxed at the highest rates in the nation.

Then there are tax credits for film productions that are nothing more than a flash in the pan, here today and gone tomorrow. Sure those film productions send residents all a “twitter” as we swoon over the latest super star in this episode or that, but one has to ask if those productions are creating permanent jobs, and if they are, does it mean that the taxpayers of Hawaii will have to continue shelling out hard-earned tax dollars to subsidize those Hollywood productions?

Then there is the tax incentive for the development of alternative fuels which initially focused on ethanol as a means of supporting the sugar industry - after years of beating up on the sugar industry. And when that didn’t work out, switching the tax credit to the more generic “biofuels.” Of course, all of these efforts came at a cost to current and future taxpayers as someone had to pay for the cost of keeping government running.

Instead of resorting to gimmicks, policymakers at all levels need to examine how government has impeded the nurturing of the business climate in Hawaii. While some elected officials would like to deny that they have created the road blocks that each business encounters in their attempt to succeed, the evidence is there, from labor laws, to permitting requirements, to the delays to just make decisions because employees don’t want to take the responsibility for possibly making the wrong decision. In fact, this latter trait is consistently emblematic of those in public sector where no one seems to realize that not making a decision is indeed a decision to do nothing.

So leaders in both the public and the private sector need to realize that the days of depending on a constant flow of federal dollars to bail out the state’s economy are over. It is now time for policymakers to get down to work and begin to address the hurdles that prevent businesses from succeeding and creating jobs that workers need now and into the future.

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