About the Author

David Cotriss

David Cotriss is an award-winning writer who has covered business, technology and finance for over 30 years. He's published over 1,000 news and feature articles for publications including The Economist, CNBC, Nasdaq.com and Entrepreneur.

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

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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.

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About the Author

David Cotriss

David Cotriss is an award-winning writer who has covered business, technology and finance for over 30 years. He's published over 1,000 news and feature articles for publications including The Economist, CNBC, Nasdaq.com and Entrepreneur.

Latest Comments (0)

Realistically, the state will never reduce or eliminate taxes that they are so reliant and good at spending. It would require real budgets and budget cuts, audits and renegotiation of union contracts and rules. When they say "when hell freezes over," this scenario would stand a far lesser chance of ever happening.

wailani1961 · 1 year ago

Political instability is the major problem facing the US today. If we lose our democracy, as will happen if the maga Republicans take over, we will most certainly slide into a fascist Society where elections do not matter. Everything else that you talk about doesn't matter if democracy falls.

Scotty_Poppins · 1 year ago

These ideas are a great start but they represent the bare minimum which should be done to raise the standard of living for Hawaii residents. America’s policies have all but ensured that we are facing another Great Depression soon. If our legislators had any vision, our state could make some bold changes to minimize the impact of the federal government’s destructive policies. Number one, eliminate the state income tax entirely. Try to remove yourself from your conditioning and pretend income tax doesn’t currently exist and was being proposed. What would you think about it? You would recognize that you are being penalized for your productivity. If your goal is to encourage people to work to support themselves, you would never charge them for earning income. It is pilau.Of course, zoning regulations are the primary reason housing is so expensive. Reducing the tax burden of working people and families not only puts more money in their pockets. It has the secondary benefit of reducing the size of the regulatory state. One of the best things Hawaii could do is to eliminate the regulation of cryptocurrency. The dollar is losing world reserve status and crypto is the future.

LibertyAbides · 1 year ago

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