Relating To An Interstate Compact To Phase Out Corporate Welfare.
The bill is designed to treat corporate welfare as an ineffective means of economic development and to encourage a more equitable playing field for businesses within the member states. Member states are compelled to refrain from providing specific subsidies to companies that are located in other member states, thus preventing a 'race to the bottom' where states compete against each other by offering more lucrative incentives to lure businesses. This could significantly alter how states approach business development strategies and resource allocation, steering them away from favoritism towards broad-based methods that support all businesses equally.
SB13, known as the Interstate Compact to Phase Out Corporate Welfare Act, aims to establish a legal framework through which member states can collaboratively phase out corporate welfare practices. This new legislation introduces a chapter to the Hawaii Revised Statutes that defines corporate welfare and assigns a national board the responsibility to draft measures to end such practices. It allows any state to join this compact by enacting similar legislation and lays the groundwork for mutual agreement on phasing out company-specific subsidies and tax incentives that are not uniformly applicable.
During discussions leading up to the introduction of SB13, tension arose as supporters touted the bill as a necessary evolution in economic policy to reduce taxpayer burdens caused by unproductive subsidies. Critics, however, raised concerns about the practical implications of implementing such a compact among states, including fears regarding the potential loss of local control over economic initiatives. Notably, the exclusions laid out in the bill—for instance, allowing workforce development grants—sparked debate on what constitutes beneficial versus detrimental forms of support, and whether the bill effectively balances state needs and competitive business environments.