Growing Hawaii’s Economy

Tom Yamachika, Tax Foundation of Hawaii
article top


Tom Yamachika, Tax Foundation of Hawaii
Tom Yamachika, Tax Foundation of Hawaii

By Tom Yamachika – On occasion I’ve testified on tax bills before our legislature. This past session, there were many tax expenditure proposals to allow credits and incentives to select groups or specific activities. I said that whenever credits and incentives take away revenue, that money needs to be made up – usually by the rest of us. “Not so,” the department of business, economic development & tourism (DBEDT) testified. “We can make up the revenue by simply growing the tax base.”


Theoretically, DBEDT’s premise is true. If we stimulate business so it produces more revenue and pays more tax, then the revenue lost to the incentives can be made up. But imagine going to your friendly neighborhood money lender about your delinquent loan payment and saying, “Don’t worry. I’ll get a job that pays 30% more than my current one and pay off your loan!” The response, of course, is likely to be, “Fine, but you still need to pay your bill now!” We may be able to grow the pie ultimately, but it’s a process that takes time. And someone has to pay the current bills while we wait for the pie to grow.

Nevertheless, growing the pie is a worthwhile goal. How do we get there? As a way of getting to the answer, suppose we focus on the manufacturing sector, which was identified by the Chamber of Commerce this past legislative session as one especially worthy of assistance. A recent survey conducted by the magazine IndustryWeek and the National Association of Manufacturers noted that the top business challenges continue to be rising health care costs and an unfavorable business climate. When asked about policy priorities for the next few years, slowing entitlement spending, finding a long-term budget deal, reducing regulatory burdens, and controlling health care costs were at the top of the list. One survey respondent had an interesting observation that seemed to capture the mood:

We need less Democrats and less Republicans and more smart people that are willing to tackle the longer-term issues with compromise. Not as a bulldozer and not with BS, but something that all Americans can believe in and actually trust.

Similarly, Hawaii should strive for a government or regulatory environment that people can believe in and trust. To do that, I recommend that we stick to the basics:

Enact laws and rules that are clear and easily understood. Don’t use vague or misleading language. It’s okay to use specialized concepts from other areas such as federal law or regulatory law because it can be really difficult to define your own concepts. For example, many of the credit bills this past session awarded credits based on “cost” but failed to define “cost.” How about using “depreciable basis,” which is a complex but well known tax concept?

Don’t change the rules in the middle of the game, or even give the appearance that the rules are changing. If a law is vague and some taxpayers seem to be taking liberties with it, there is a great temptation to clamp down and make life harder for everyone. But that can defeat legitimate expectations, fuel distrust, and give the impression that the state was engaging in “bait and switch” from the start.

Be true to legislative intent. Advocates in both the public and the private sectors try to convince lawmakers and agencies to apply a law in areas it wasn’t intended for. We should resist the temptation and be true to the interpretation that addresses what the law sought to address and stop there.

Once we have created an environment that we can believe in and trust, we would have eliminated one of the barriers that is keeping us from being internationally competitive and improve our chances of actually growing the pie.

Tom Yamachika is the Interim President of the Tax Foundation of Hawaii. Mr. Yamachika’s commentary is printed each week in: The Maui News, West Hawaii Today, The Garden Island, Civil Beat , Hawaii Free Press and the





  1. we will never get a government or a regulatory environment that people will believe in and has never happened in the past,has it? and will it ever happen at all? the government in Hawaii is all about control.a good example is one government agency that is mentioned in the article above:DBEDT. the department of business,economic development,and is ridiculous to even consider that this government agency knows anything about how to improve our economy.they are in fact created by politicians and bureaucrats to centrally control private industries and extract tax some of these high paid bureaucrats in DBEDT receive personal benefits from the tourism industry:revolving doors,cronyism,gifts,etc? this arrangement is fascism/socialism and cartelism. obedience to the state at all times. we need a free market and personal liberties.these unholy alliances with the STATE will never give us prosperity.only higher txes and costs.

  2. DBEDT doesn't have a clue on how to improve our economy.the tourist industry and other private businesses would be better off disassociating themselves from that government agency and stick to free market principles.

  3. I think it should be a concern to allhawaii residents and tax-payers.and this includes all rank anf file government workers because at the end of the day you are also a private citizen,tax-payer and property owner.when these government agencies like DBEDT "partner" with the tourism and other related industries,they actually take control through central planning bureaucracy.they act like a toll booth and extract taxes and fees from these industries and all the incoming tourists.these agencies cannot create wealth.only redistribute the wealth.these agencies pick and choose who has a vampire effect on our fragile economy.should we dismantle DBEDT(sounds like we are talking about an insecticide!)?yes.we need genuine capitalism.

Comments are closed.