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Government Needs to Support, Not Direct

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By Lowell L. Kalapa

One of the fascinating facets of elected officials is the fact that many believe that they can determine the direction of the future of our community.
Elected officials see themselves as having the power to make laws by which all of us have to abide and therefore are in a position to determine where the future of our community lies. As a result, elected officials adopt laws and establish programs or projects that go well beyond the basic services expected of government.
Of course, the most obvious reflection of this marked propensity of elected officials to play “supreme being” in determining the future of our community is the use of tax incentives. At the state level there are plenty of examples, the most notorious of which are the Act 221 tax credits to encourage investment in high technology. While elected officials extol the virtues of providing tax incentives to lure investors to place their funds with high technology businesses located in Hawaii, one has to stop and ask why elected officials believe that high technology companies are the economic future for Hawaii.
Are elected officials omniscient that they know that high technology companies will produce the jobs future members of the workforce in Hawaii will need? Conversely, while elected officials dangle these tax incentives out there for one and all to take the bait, what are they doing about insuring that there is a trained workforce to fill the anticipated jobs that these industries are anticipated to supply?
And again, when the economic downturn of 9/11 hit, lawmakers resorted to tax incentives to “stimulate” construction activity which is thought to have the greatest impact on the economic momentum of the community. Tax credits were sweetened for hotel construction occurring within two years and tax credits were handed out for residential construction and renovation with the thought that the lure of “free money” would entice homeowners to renovate or perhaps construct new improvements on their homes.
As we have learned in hindsight, it was not the tax credits that drove the construction boom as much as it was the record low interest rates that had homeowners improving their homes so that they could be sold and upgraded to a nicer house that was closer to town. As for the hotels, the sweetened tax credits didn’t accelerate renovations or new construction as the window of opportunity was so short. Instead, the tax credits were just extra gravy for those hotel owners who already had projects on the board. Looking back, those tax credits were certainly a poor use of state resources.
If it was not tax incentives then it was commissions to study this or that or to see if some sort of activity or new venture would be feasible. For example, during this past session legislators wanted to establish a public commission to study whether or not it would be feasible to establish a state-of-the-art equestrian facility for international use in the state. Luckily the proposal was vetoed on the basis that this is something better done by the private sector rather than by government.
Then there is the obverse side of the coin reflected in the multitude of mandates, requirements, and standards enacted by elected officials in the name of protecting the health and safety of our community. Not only do these mandates heap additional costs on the taxpaying public, but they create yet another barrier to living and doing business in Hawaii. In a sense, these rules and regulations represent another tax in that it costs the applicant time and money to comply with the rules, regulations or permitting and licensing processes.
And then there is the failure on the part of government to use what tax dollars we are asked to give up for the purposes for which we were told they were being collected. Case in point is the siphoning of state highway fund revenues to make up the shortfall in general fund resources. Meanwhile, our state roads and bridges fall into disrepair with the all too familiar potholes in the road.
In the City & County of Honolulu, the city’s sewer fund was sacked for over a $100 million while the prospect of a federal consent decree mandating an upgrade of one of the county’s major sewer facility looms large. As a result, either sewer fees will have to be raised or real property taxes will have to go up so that there will be enough money to upgrade of the sewer facility.
If elected officials really want to do taxpayers a favor, the one thing that they can do is get out of the way and let the market dictate what will be the salvation of our economic future. And that means putting an end to higher and higher taxes and more government regulation.

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