Partnerships key to achieving economic goals

Recently, the head of the state’s economic development department called on the private sector to help pay for public-private projects to drive the local economy.

Calling on businesses to partner with state government and provide private capital to develop new industries, improve public lands, and link the Islands with an undersea cable to deliver broadband technology and renewable energy, the director seems to gloss over one of the key reasons why such partnerships have not occurred in the past – government. Such lofty aspirations made for great media coverage, but the reality is that one of the major hurdles to a prosperous Hawai‘i is state and county government.

Instead of working with the private sector to foster and nurture a thriving economy, government has thrown every single hurdle possible in the way of those who would want to venture into new realms of business. Just ask any business about the trials and tribulations of trying to start up a business in Hawai‘i, from the massive number of forms to be filled out to the frustrating maze of permitting requirements necessary to open that front door on the first day of business. While the intent of those permits and regulations are certainly in the best interest of the health and safety of the community for both workers and consumers, the administration and compliance with those requirements just boggles the mind and drives up the cost of doing business in Hawai‘i.

When so much in resources is required to get to the starting block, one wonders why anyone would want to start a business in Hawai‘i. Although many of the complaints that we hear about the trials of dealing with government seem to come from small businesses, as they are the least likely to have the substantial resources it takes to navigate the maze of requirements, many larger businesses grouse privately about the costly overhead and expenses incurred in starting a new venture. They do so privately because those businesses don’t want to be blackballed or incur the ire of those government regulators else the process be delayed even more.

As a result, many business leaders are reluctant to speak out or to criticize government, a “go along to get along” syndrome that has, in part, contributed to the apathy shown toward business in Hawai‘i. It is that “everything must be all right because no one is complaining” attitude that allows public policymakers to add even more restrictions, regulations and redundancies to state laws. Meanwhile, the perception of those who must deal with these regulations is that public policymakers must surely have never worked a day in their lives or else they too would understand the difficulties imposed by the numerous laws enacted to “protect” the public.

So when a state official asks the private sector, the business community, to partner with state government, that official is talking to a group that has already “given at the office” – given in taxes, given in regulations, given in donations to community groups and donations to political candidates. How much more will the business community be asked to give if there is no contribution on the part of state government?

Granted, it is not all one way, if there is any failure of business it is that they have failed to stand up against the onslaught; no, make that avalanche, of costs imposed by government. Perhaps it is because there is no real voice of business as the business community is diversified with each sector trying to execute its own agenda, usually at a cost to the rest of the business community and the taxpayers of the state.

Take, for example, the big push to use targeted business tax incentives to “diversify” the economy. Tax credits were created for high technology, for construction and renovation, alternate energy, and the list goes on. Unfettered and uncontrolled, those tax credits became a drain on the state treasury with no real oversight as to whether or not they produced the business activity or jobs they promised when enacted. Had those tax credits not been handed out so freely, perhaps the budget shortfalls would not have been as large as they are.

Instead, the rest of the community, both businesses and families, are now being asked to fill the budget gap with additional taxes that will burden the economy with yet another heavy load that will make it even more difficult for the state to dig itself out of this hole.

Thus, before state officials call for public-private partnerships, those state officials would do much better by looking at how difficult the state has made it to do business in Hawai‘i, let alone to survive in this state, and begin peeling back the excessive and intrusive laws and regulations that prevent budding enterprises from setting up shop in this state. Instead of deciding what should be the most favored industries of Hawai‘i’s future, state officials should make sure the environment is nurturing to all businesses.

• Lowell Kalapa is president of the Tax Foundation of Hawai‘i, a private, nonprofit, non-partisan, educational organization established to research issues confronting governments in the area of public finance, taxation, and public administration. Visit www.tfhawaii.org for more information.