Look at What Makes Hawaii Uncompetitive

article top

With the economy struggling to stay afloat, lawmakers, as well as administration officials, will take another swing at trying to bolster the economy.

Unfortunately, the quick fix of tax credits seems to have the most appeal perhaps because it is simplistic in its form and shape. After all, Hawaii is known for its high burden of taxes. Unfortunately, targeted tax credits aimed at attracting a certain type of activity or industry do nothing more than ensure that the tax burden for everyone else remains high.


Why? Because unless lawmakers dramatically reduce the level of spending, they will need all the rest of us taxpayers to keep on forking over those tax dollars that keep the state spending machine fed. If that is the case, then no amount of tax credits or tax incentives is really going to move the economy forward. So what is the poor lawmaker to do about stimulating the economy and creating the jobs constituents need if tax incentives and tax credits are not the way to go?

One might start by asking what are some of the considerations in deciding to set up a business in Hawaii or for that matter investing in Hawaii. Certainly location and distance have to be major considerations. And indeed, Hawaii is one of the most isolated inhabited spots on the earth, being nearly 2,500 miles from the nearest major market. Accessing those markets has to be a critical element in weighing the decision to locate in Hawaii. Can that hurdle be overcome with innovations in telecommunications and transportation? Can lawmakers help to keep the cost of either within reasonable limits?

What about the cost of site, that is, a place to set up a company or business in Hawaii? Is there enough urbanized land available to satisfy the needs of both new and existing businesses or will zoning and land use hurdles limit what is available? Should there be a dearth of options, will that drive the cost of a site to a level that it will not pencil out for a business to locate in Hawaii?

What about the cost of regulations or at least complying with the multitude of rules? Will they make it too expensive to do business in Hawaii? This is certainly within the purview of lawmakers who have the power to impose those regulations or repeal them. While rules and regulations are necessary to ensure the health and safety of workers and consumers, how they are administered and imposed can escalate the cost of doing business.

Another area that is often overlooked is the cost of energy. There are few, if any businesses, which can do without energy, be it high technology or even a low technology farm. Hawaii has amongst the highest cost of energy in the nation as almost all of it is imported. And while there are alternate energy sources like solar and wind, the technology to capture this energy is also costly.

Lawmakers could look at ways to help reduce this cost or make capital available so that businesses can acquire this technology. While lawmakers have offered tax credits for the last quarter century, it is obvious that it will take more than tax credits to expand the use of alternate energy.

Certainly, business weighs the cost of labor in factoring whether or not they can make a go of it in Hawaii. It is not a matter of how much they will pay employees as much as it is all of the other costs of providing employment from workers’ compensation insurance to health-care insurance. With mandatory prepaid health care required of all employers, lawmakers need to work on bringing the cost of health-care insurance down. For example, over the years all sorts of services have been added to the list of what must be provided under the prepaid health-care requirement. Lawmakers need to evaluate what core health services should be included.

Last, but not least, the quality of education offered in Hawaii has to be a major consideration for businesses. Not only do businesses want a skilled and trained workforce, but they also need a quality education system if they are to attract employees to live and stay in Hawaii. If a quality education system is not available, it will be difficult to attract and retain the quality employees needed for a modern day business. While the issue of improving the education system has been hammered to death, lawmakers and administrators need to do something now rather than merely passing the blame back and forth.

There are many things that lawmakers could do to stimulate the economy. It certainly does not start or end with tax incentives and tax credits.

”’Lowell L. Kalapa is the president of the Tax Foundation of Hawaii, a private, non-profit educational organization. For more information, please call 536-4587 or log on to”’ https://www.tfhawaii.org