Posted on behalf of Jay Fidell from ThinkTech
and the July 12, 2009 Honolulu Advertiser
In her veto list of June 30, Gov. Linda Lingle said she would veto SB 199, the bill that pulled the wings off Act 221, the high-tech tax credit.
This unleashed an endless chain of e-mail within the tech industry. Some were overjoyed, others were skeptical. There was no one who wasn't surprised.
The veto list is only a statement of intention. She must now actually veto by Wednesday. What will she do? Only her chief policy adviser knows for sure.
FACTORS IN PLAY
Perhaps she'll veto SB 199:
In her 2002 campaign, she promised the industry she'd let 221 "run its course." The industry wants her to keep that promise.
After SB 199 was passed, she met with industry members to discuss the merits of a veto, and seemed fair-minded.
She did put SB 199 on the veto list, and many people expect her to veto it just as she said. They will be profoundly disappointed if she doesn't.
SB 199 also suspended the capital goods excise tax credit. This is a tax increase, and some constituents may be asking her to veto on that basis.
She knows tech is ticked that the Legislature passed SB 199, with special enmity for those who pushed it and would try to override a veto.
With SB 199, Act 221 is dead. Startups are not asking for 221 comfort letters and no one's getting one. Investors are looking at other ways to shelter their taxes. Veto or not, the damage is done, and what's left of 221 expires in 2010.
As a result, there are already job losses, deals have been killed, companies are closing and other companies are staying away.
Perhaps she won't veto it:
She and her kitchen cabinet have been trying to undo 221 for years, using the state tax office to cram down regulations and DBEDT to lobby draconian changes. Her enforcement has been political, putting it mildly.
She's been trying to "tighten" 221 all session, and the "cap" in the bill she proposed was a whopping 25 percent less than the one proposed by industry.
If she felt strongly about SB 199, as she apparently did about HB 1405, the Internet tax, she could have vetoed SB 199 early. She didn't.
She's in a shooting war over the "$730 million shortfall," fighting with the unions and legislators on both sides about tax increases, furloughs and layoffs.
The Advertiser, in last Sunday's editorial, came out in favor of SB 199 and opposed a veto. This should have come as no surprise to those who have followed its editorial policy on this issue.
Although to the naked eye there are more factors working against a veto than for it, it's not simple and we really can't say which will prevail.
Some people will be optimistic and others cynical, but here are some logical possibilities:
She could veto SB 199, leaving layoffs or a tax increase to cover the gap. The $221 question is whether the leadership can override that veto.
She could veto and cut a deal with the leadership for a son-of-221 that would really make your hair stand on end.
She could veto and re-attack 221 next year, opposing any extension.
She could let SB 199 pass into law, trying to co nvince us that intervening events have again somehow changed her mind.
HOLD YOUR BREATH
She put SB 199 on the veto list to keep her options open, but none of us can be sure what she'll do at the moment of truth. Horse trading is still in the room.
Lately, she's been arranging unprecedented meetings with longtime 221 antagonists against selected members of the tech industry. Insiders say she already knows what she's going to do, so this is theater designed only for political cover.
If she vetoes SB 199, the tech industry will be delighted and give her credit. If she doesn't veto it, the tech industry will consider that another betrayal.
She's got our attention, but is this sincere or just mid-game sport? We can hardly wait until Wednesday to see what happens.
A veto would be a big legacy point for her, but there are no guarantees. As an optimist, my bet would be on the veto. As a realist, my bet is on the budget.
We must spark an industry of energy startups
Please send this letter to Governor Lingle
POST 221 CHALLENGES FOR THE TECH INDUSTRY