Technology industry advocates yesterday said the state tax credits, known as Act 221/215, are boosting Hawai'i's economy and moving it away from dependency on tourism. But a lack of data is making it hard to prove their case.

The state Tax Review Commission, which is charged with recommending changes to Hawai'i's tax code, sponsored a meeting at the Capitol yesterday to hear advocates of the tax credits defend the program.

The state adopted Act 221 in 2001 to encourage investment in technology companies. The credits were updated in 2004 as Act 215. They provide investors a $1 tax credit for every $1 invested in a qualified technology company.

Because of the credits, Hawai'i's technology sector is growing more rapidly than the tourism sector, which pays far lower wages, said Patrick Sullivan, chief executive for Hoana Medical, a Honolulu-based medical device company.

"I haven't seen those numbers (proving it), but we're living it," Sullivan said. "Living this, I can tell you we're way better today than we've ever been, but we still have ways to go."

Debate about the credits was reignited last week when the Tax Review Commission released the draft of a study by Marcia Sakai, dean of the College of Business Administration at the University of Hawai'i-Hilo, and University of West Georgia professor Bruce Bird. They found that the number of technology-related jobs in Hawai'i likely fell by 2.7 percent from 2001 to 2004 despite the tax credits.

Act 221 architect and former state tax chief Ray Kamikawa said the benefits of the program should not be measured only in terms of job creation. The program was designed to change local investing patterns away from real estate in favor of technology.

"Act 221 was born out of the desire to do something tangible, tangible to diversify the economy," said Kamikawa, now a Ho-nolulu tax attorney. "It was thought to be dangerous to only rely on tourism and the defense industry."

The state does not release information on the investors or companies making use of the tax credits, or the number of jobs that have been created as a direct result.

In hindsight, the program could have been crafted to include benchmarks to make it easier to determine whether it was working as planned, Kamikawa said. However, the credits were mainly designed to be removed from government bureaucracy.

"We wanted to design 221 to be private-sector friendly - as a private negotiation between the company and the investor," Kamikawa said.

Advocates pointed to the success of local companies such as Hawaii Biotech, Hoku Scientific and Hoana Medical, which have grown with help from the credits.

Ann Chung, vice president of government and community affairs for the Hawaii Science & Technology Council, a trade group representing the technology industry, said the cost of the credits is offset by the economic activity they generate.

Rob Robinson, who runs an investment group whose members have benefitted from the credits, said, "I think it's clear that the critics are wrong." Robinson added, "What we don't have is data yet to show that I am right."

"This act was enacted without proper measurement criteria, and I think we can all agree on that, and I think that's too bad," Robinson said.

While most participants in yesterday's meeting agreed there's not enough information to prove the program is working, there was disagreement about how to get data and whether continued discussion on the credits' merits is hurting the program.

The credits have helped generate about $185 million in investment into Hawai'i companies through June 30, 2004, according to the state tax department. And since then, the state has foregone $110 million in tax revenue as a result of the program. Some of the tax credits will be taken in future years.

The tax department estimated last month that the credits could cost up to $1 billion in forgone tax revenue over the 10-year life of the program.

Chung agreed that not enough information is publically available to illustrate the program's full value. The state tax department has all the data needed to analyze the cost and benefits of the credits, she said.

"It's really (a matter of) how do you get them to compile it and get it out?" she said.

Tax Review Commission member John Roberts said technology-industry trade groups also have a responsibility to collect data on the program's impacts.

"I'm not yet sold on the idea that this responsibility should be levied upon the state, and then we criticize them after the fact," he said. "Why don't we do this right and build it from the ground up through your trade association?

"I'd rather you come forward and say 'This is what we've got.' "

Chung agreed.

"As a trade association, that is part of our job," she said. But "we don't yet have really good data yet on the whole industry.

"We can do a survey, but we don't know exactly whom we should be targeting."

Reach Sean Hao at shao@honoluluadvertiser.com.