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Retaining What We Have More Important Than Luring New Ones

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By Lowell L. Kalapa

While it is true that Hawaii is a capital short state and that in order for our economy to survive we must attract new capital investment to the state, policy makers must not lose sight of the fact that we must do everything possible to keep those businesses which are already here in business.
That’s why the whole idea of the legislature, and to some degree the administration, going ape over providing tax incentives to attract new businesses to Hawaii makes no sense. Instead of putting their efforts toward improving the business climate so that those businesses which are already here can survive, policy makers have found it easier to dangle tax credits and tax holidays out to attract new investments and new businesses to Hawaii.
And that would be well and good if in fact the overall situation for businesses in Hawaii was also being improved. Instead, it seems policy makers have intentionally or unintentionally chosen to ignore the draconian environment they have created for businesses in Hawaii. Not only has the tax climate not improved dramatically, but taxes have been replaced with fees of all sorts. And the regulatory atmosphere is no better than it was ten years ago and in many cases it is worse than it was.
Now that the legislative session is over, lawmakers and administration officials should sit down and do some good old homework and figure out what makes it so difficult for a business to survive in Hawaii, from building permits and health permits to regulations governing work place safety to environmental restrictions. In many cases, laws and regulations are so difficult with which to comply that businesses end up hiring lawyers or accountants or consultants to help them to understand the laws, fill out the forms, and basically stay in compliance. All of this ends up costing the businesses money, a cost that must be recovered in the cost of the goods or services sold by that business.
And why should lawmakers and administration officials bother with such a boring and mundane homework assignment? Well, if they have not figured it out by this time, if the cost of doing business keeps on escalating, then those businesses will just find some other place to do business – scratch one more place to find a job. And if costs go up and the business can’t afford to raise prices because it will affect sales, then guess where that business will look to compensate for the higher costs of doing business? Employees can just forget about a pay increase. Another alternative is to layoff employees or cut hours or as many businesses have done, going to shorter workweeks with more part-time employees so they don’t have to provide benefits.
The administration campaigned on a “new beginning” for the state and the people of Hawaii. Critical to that new beginning is the way the state treats the businesses which have invested not only money but blood and sweat in making this the paradise we enjoy today. So while it might just be sexy to talk about attracting new businesses to Hawaii, what about those businesses which have been in business for the past century or more?
The axiom that applies to clubs, associations, fraternities and sororities is just as appropriate to the economy and the business community, “It is easier to keep them than it is to attract them.” In other words, the legislature and the administration should work on retention just as hard, if not harder, than they have worked on attracting new businesses to Hawaii.
And while dangling those tax incentives may play well in a campaign brochure or before the media as the maile lei is untied before a new business location, those tax incentives mean all those businesses and families who don’t get a similar incentive will end up paying for those incentives. When will public officials recognize that all boats rise with the incoming tide? If taxes and regulations are reduced for all businesses and individuals, the climate for living and working in Hawaii will improve across the board.
What do lawmakers think when they provide some sort of tax break to attract a new company to Hawaii only to have that company and its employees discover how expensive it is to live in Hawaii? So while the favored new company may get a break on their taxes or a subsidy from the state or county government, they must still try to survive in a business climate that has basically driven many out of the state.
Let’s hope lawmakers and administration officials will do some homework between now and the next legislative session rather than merely whining political rhetoric.

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