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Jumping Through the Hoops Should Not be the Case

posted in: Weekly Commentary 0
By Lowell L. Kalapa

Now that the elections are behind us and those incessant political advertisements have all but disappeared, it is time for all of our newly elected officials to take a moment and truly figure out what needs to be done whether it is at the state or county level.
One issue that resonated throughout all of the campaign season rhetoric is that the economy needs fixing. Both gubernatorial candidates focused on gimmicks like tax credits and tax cuts as the panacea to Hawaii’s economic woes. Both were wrong. It will take more than some carrot held out hoping that some sucker company will jump at the financial bait only to find out later that it is a bait and switch game in Hawaii.
What many companies who took advantage of some sort of incentive approved by previous legislatures and administrations learned is that those tax incentives just don’t compensate for what is the real tax on businesses in Hawaii, the high cost of complying with the maze of regulations and permitting imposed by state law and administered by a bureaucracy whose philosophy is based on the theory that molasses can flow uphill.
Ask any business where the fixed costs are and they will point out the hoops through which they had to jump in order to get their business up and running not to mention the constant intervention by inspectors and regulators who come to fine and penalize rather than help and support those businesses. Don’t get the wrong idea here! There is a role for regulation and standards, the point of the matter is how these regulations and standards are administered.
Those who have had to traverse the maze of public bureaucrats will testify to the frustration encountered when trying to comply with the letter of the law. As one restaurant owner related, instead of telling her before she installed her air-conditioning system that she needed a certain type of vent, the inspector waited until the system was installed and the wall replaced before telling her that her system was in violation of the law. As she said, thanks a lot for making me spend another $20,000 to have the work redone because no one told her that she needed that specific vent.
How is this going to help fix the economy? Well, the answer is so obvious. It will help to reduce the cost of doing business in Hawaii. Regulations that are enforced with the intent to frustrate or obstruct can only cost businesses more money than it would otherwise have cost to comply. As noted earlier, it is not that all regulations are bad, in fact the reason for regulation is to protect the health and safety of the public at large. The problem is how those regulations are administered and enforced.
The whole point of the matter is that these regulations cost a business whether or not the business sells its services or products. Unlike taxes which recognize that there is some sort of activity, that income is being realized, regulations exact their due without regard to the activity of the business. It is considered a fixed cost, a part of the overhead that has to be recovered in the cost of goods and services made or sold by that enterprise. The more costly and draconian these regulations are and how they are enforced, the higher the cost of doing business in Hawaii.
So while tax credits, tax exemptions and other tax gimmicks may have sex appeal, they mask the real problem for businesses in Hawaii. It is the high cost of setting up and keeping the shop open. This means not only the obvious government regulations but the costs imposed by government mandates like prepaid health care and liability and workers’ compensation insurance.
While elected officials argued that the problems have been fixed and all is well, that is not what you hear from businesses and individuals. If indeed the problems have been fixed, that government has been streamlined, then why are businesses still complaining and more importantly why are so many being driven out of business?
If everything is hunky-dory, then why is the economy still flat and why aren’t new businesses coming to Hawaii or investors plunking down cold hard cash to invest in Hawaii ventures? Could it just possibly be that it is too expensive to do business in Hawaii? Could it be that investors are wary of the fact that if they invest in Hawaii, the state or county government will regulate what they can charge for their products or services like lawmakers slapped on the price of gasoline and the regulation of health care premiums?
Reform of the way government treats business is needed if this economy is to be turned around.

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