Hawaii Lieut. Gov. James “Duke” Aiona Jr. Wednesday vetoed a bill that would have imposed a moratorium on tax credits the state had promised to investors.
The Act 221 tax credits, enacted beginning in 1999, offered local residents, banks, and insurance companies credits against state income or business taxes in return for investments in local technology firms.
Lawmakers voted to impose a three-year moratorium on paying the credits, saying it would save the state $93 million and bring the budget closer to balance.
Tax-credit investors protested loudly, saying the state was changing the rules in the middle of the game, and breaking the promise that led them to invest in Hawaii businesses.
“This bill would damage Hawaii’s reputation as a place to do business,” Aiona said in a news release Wednesday. “It will discourage individuals and companies from investing in our state by changing the rules with little notice or rationale.”
Aiona also agreed with opponents who said the state would be unlikely to realize any savings because the bill would be challenged in court.
The tax-credit moratorium passed the state Senate by a 14-to-11 margin, suggesting lawmakers are unlikely to override the veto.
Aiona vetoed the bill in his capacity as acting governor, filling in for Gov. Linda Lingle while she is on an Asian trade mission.
