Hawaii Film Blog: New Data on Effectiveness of Act 221

Monday, October 09, 2006

New Data on Effectiveness of Act 221

In Saturday's Honolulu Advertiser, Sean Hao continued (as any good, responsible reporter should) to raise questions about the effectiveness of industry-specific state tax credits. Hao reported on the recently released draft of a study conducted for the state's Tax Review Commission on how well the Act 221 high tech investment tax credit is working for Hawaii. The final report will come out at the end of the year, but here's a summary of the Commission's preliminary findings:

Between 2001-2004, the number of tech-related jobs in Hawaii appeared to have dropped by 2.7% to 13,106 jobs. (In contrast, companies benefitting from Act 221 claim that 4,000+ jobs were created between those years.)
The relative share of technology jobs vs. jobs overall has also dropped.
Since 2001, Act 221 has helped stimulate approximately $185 million in investments into Hawaii companies.
Since 2001, the state has committed $110 million in credits (including credits not yet claimed, but projected to be claimed in future years).
One co-author of the report estimated that the total cost of Act 221 between its lifespan (2001-2010) could top $600 million.
The report concluded that there is a lack of information about Act 221, making it tough to tell whether Hawaii is benefitting from the credits. Recommendations include creating more state accountability for the credits, simplifying the eligibility criteria, and making info available to the public in a more timely manner.

Of course, different people had different things to say about about the findings. Here are some of the opinions Hao reported:

On the $185M investment capital stimulated by Act 221: Report co-author and dean of UH Hilo's College of Business Administration Marcia Sakai said that this is good for local companies, but only an intermediate step of Act 221--what matters is what those dollars will actually do (e.g., create jobs, build industry, spark innovation, etc.).
On jobs created: The report's authors cautioned that it takes time for start-up companies to add jobs. Also, Ann Chung, VP of government and community affairs for the Hawaii Science & Technology Council, believes that state job creation numbers aren't accurate because of the disconnect between how the tech industry reports job data and how the Dept. of Labor tracks and inteprets it.

Apparently, tech industry reps will get to submit their concerns to the Commission before the final report is published. If I hear more about how to do that, I'll let you know.

>> Isles' tech jobs drop despite tax credit [Hnl Advertiser, 10/7/06]