Tax Incentive Evaluation Law: Hawaii

Fact Sheet July 12, 2016 Read time:

Projects: Economic Development

This page is no longer being updated. As of June 15, 2017, newer tax incentive evaluation fact sheets are available here.

To ensure that economic development tax incentives are achieving their goals effectively, many states have approved laws requiring regular, rigorous, independent evaluations of these programs. For a list of states that have passed evaluation laws since the start of 2012, click here.

Hawaii

H.B. 1527 and S.B. 2547, enacted July 12, 2016

What it does

Requires evaluation of all major tax incentives
The state auditor will evaluate the performance of tax incentives and other tax credits, exclusions, and deductions. The auditor will conduct the evaluations on a rotating cycle that is written into the law.
Ensure that reports draw policy-relevant conclusions
The evaluations will estimate to what extent the incentives are changing business behavior and whether the benefits are worth the cost. The auditor will recommend whether each tax incentive should be continued without changes, amended, or repealed.

Requires evaluation of all major tax incentives

The state auditor will evaluate the performance of tax incentives and other tax credits, exclusions, and deductions.

The auditor will conduct the evaluations on a rotating cycle that is written into the law.

Ensure that reports draw policy-relevant conclusions

The evaluations will estimate to what extent the incentives are changing business behavior and whether the benefits are worth the cost.

The auditor will recommend whether each tax incentive should be continued without changes, amended, or repealed.

Excerpt from Hawaii’s law: Evaluation criteria

In the review of a credit, exclusion, or deduction, the auditor shall:

(1) Determine the amount of tax expenditure for the credit, exclusion, or deduction for each of the previous three fiscal years;

(2) Estimate the amount of tax expenditure for the credit, exclusion, or deduction for the current fiscal year and the next two fiscal years;

(3) Determine whether the credit, exclusion, or deduction has achieved and continues to achieve the purpose for which it was enacted by the legislature;

(4) Determine whether the credit, exclusion, or deduction is necessary to promote or preserve tax equity or efficiency;

(5) If the credit, exclusion, or deduction was enacted because of its purported economic or employment benefit to the State:

(A) Determine whether a benefit has resulted, and if so, quantify to the extent possible the estimated benefit directly attributable to the credit, exclusion, or deduction; and

(B) Comment on whether the benefit, if any, outweighs the cost of the credit, exclusion, or deduction; and

(6) Estimate the annual cost of the credit, exclusion, or deduction per low-income resident of the State. For purposes of this paragraph, a "low-income resident of the State" means an individual who is a resident of the State and:

(A) Is the only member of a family of one and has an income of not more than eighty percent of the area median income for a family of one; or

(B) Is part of a family with an income of not more than eighty percent of the area median income for a family of the same size.