Across the world, the economy has contracted over the last few months.

Global GDP fell 2.7% between April and June 2022, and the United States felt the effects particularly hard. Hawaii is no exception — the Department of Business, Economic Development and Tourism recently downgraded predictions for the state’s economic growth to 1.7% for 2023.

But while the rising prices, political instability, and sluggish economy of today are a problem, the uncertainty of what comes next may be even more worrying.

Let’s look at possible ways the government can help individuals and businesses to make it through.

Reforming Taxes

While a lot of responsibilities for cutting inflation lie with the federal government, there are still ways that states can take action. One of the biggest tools that state governments have at their disposal is tax cuts, which can reduce the impact of uncertainty by giving individuals and businesses a bigger cushion.

Although Hawaii is the state with the second-highest personal income tax rate in the U.S., the Hawaii Budget and Policy Center has noted that most tax reform so far has been focused on cutting taxes for large corporations and wealthier groups.

However, income tax cuts aren’t the only option. The state government can also make changes to tax brackets or rules regarding deductions and exemptions. Democratic candidate for the upcoming gubernatorial elections, Josh Green, has looked at removing the state excise tax on food and medicine.

Instead, he proposes a fee for tourists to pass the rising costs on to them. There are hopes Japanese visitors will return, which could make this solution viable.

Still, all of this is far from a magic ticket. By encouraging more spending, tax cuts can carry the risk of making inflation worse, which only increases uncertainty over the long run.

Reducing Regulations

From those in the construction industry suffering from the rising costs of raw materials to the tourism firms that are unsure if anyone can afford to travel to their resorts, the cost of living hits businesses hard.

If businesses don’t know how much they’ll have to pay on their fixed overhead expenses over the next year, how can they make future plans and take the risks of hiring employees or expanding? Although there are some grants available, more could be done.

Hawaii has already started creating a regulatory sandbox for crypto companies.

A common area to look at is reducing business regulations where possible. While this doesn’t remove uncertainty entirely, it means businesses have fewer costs to deal with. Another area to pay attention to may be Hawaii’s zoning regulations, which are notoriously stringent and often blamed for increasing the cost of housing.

A unique solution that has sprung up over the last couple of years is regulatory sandboxes, which reduce the usual barriers to entry for new businesses. Some states have experimented with them, and Hawaii has already started creating a regulatory sandbox for crypto companies.

It may be worth considering a similar measure for other industries to encourage innovation, which could also promote job growth. For instance, Utah introduced an industry-wide regulatory sandbox, which allows new businesses across any sector to test out their idea (as long as it’s deemed that it doesn’t carry health, safety, or well-being concerns).

Tennessee is also considering a broad regulatory sandbox — could Hawaii take a similar route?

Naturally, the state needs to help existing businesses, and not just new entrepreneurs.