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State loses if tax credit cut for renewable energy

For Tuesday, March 22, 2011

By Jay Fidell

POSTED:



One thing about Hawaii is that we seem to have a bad memory. We set out visionary initiatives, then get distracted and forget about them. Soon enough, the stone rolls back down the hill, and we begin all over again. Forgetfulness is now lapping at the gates of the 2008 Clean Energy Initiative, as it did for earlier energy initiatives. Those who forget are doomed to repeat, and that's nothing short of tragedy.

Sure, the Legislature is stressed over the tsunami and balancing the budget. It seems bent on cutting costs, so tax incentives have again become a target, not with a scalpel, but a blunderbuss. Unless we watch out, this third year of cost-cutting will cut to the bone of the economy itself. This will exacerbate, not ameliorate, the recession.

Macroeconomics 101 tells us that cutting costs doesn't build an economy. For that, we need to build business, attract investment capital and incentivize risk. We also need to diversify, since a mono-economy, particularly without Japa­nese tourists, won't sustain us.

In recent years the solar energy industry has grown to hundreds of companies and thousands of jobs around the state. In large part it seems to be supplanting the tech industry we had hoped for, and has great promise. Cutting the renewable energy tax credit, which has done so much to build the sector, would now pull the rug out before it has had a chance to deliver on the promise.

Ah, but the instinct to tamper runs high in the Square Building. HB1270 would repeal all tax credits and exemptions within five years, requiring the Tax Department, of all people figuratively, to assess each one and determine whether it should be reinstated, with all the disruption that that would bring. HB 566 would sunset the energy credit in 2016 and require in the interim that refunds be delayed for two years. Whatever the lipstick, its purpose is to eliminate the credit.

Eliminating the credit is a lose-lose-lose proposition where the state is the biggest loser — in jobs, tax base and state product. Even in the unlikely event that cutting the credit would yield additional revenue after paying the unemployment benefits of the laid-off workers, it would disappear into the general fund with no hope of long-term benefit or so much as a fare-thee-well.

The Fed is way ahead of us. In 2011 the federal solar tax credit can be taken as a grant, making it attractive even for those who do not have tax liability to offset — a key point as we fight our way out of the Great Recession. This year, taxpayers also can depreciate 100 percent of the system in the year it is installed — another boost for solar. The Fed thinks renewables are an important investment, even and especially in hard times. Don't we?

For the state, the cost of the energy credit is actually a leveraged investment. For every dollar the credit "costs" the state, more than a dollar goes into the economy — through investment capital, jobs and disposable income. Remember that it works the same way in reverse — for every dollar of credit you cut, you pull much more than a dollar out of the economy.

There's something else, too. The public has gotten excited about renewables and has come to feel Hawaii can be a world leader on energy. It empowers people and makes them proud that they're doing something good for the environment and the community. We're on a roll. Don't break our hearts, and our long-awaited diversification, with blunderbuss parsimony.

Of course, we want to move to systems with wind, biofuel, geothermal, wave and ocean energy, but many of those proj­ects have years to go. Solar remains our most proven and popular renewable, and it needs our continuing attention and support to play its role. Prog­ress means staying true to long-term vision. Killing the goose is more like seppuku.

Whatever our economic problems, destroying our most promising industry is not the solution. These bills would have a terrible effect not only on the industry and the economy, but on our image to a world that wonders whether we can keep up with the 21st century. If the leadership passes them, it'll be because we couldn't remember where we were going.

Vision is a terrible thing to waste.

Jay Fidell, a longtime business lawyer, founded ThinkTech Hawaii, a digital media company that reports on Hawaii's tech and energy sectors of the economy. He can be reached at fidell@lava.net.






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