Not one but two bills adopted by the 2009 legislature would tax Internet transactions in Hawaii.

One, HB1405, would require Internet vendors to collect the Hawaii gross excise tax (GET) on purchases from Hawaii. 1405 would treat “advertising affiliates” in Hawaii as the “substantial nexus” required by Quill Corp. v. North Dakota, a 1992 U.S. Supreme Court case.

The other, SB1678, would call for Hawaii to join 23 other states in adopting a cooperative “streamlined” (euphemism) national Internet sales and use tax. 1678 could not be effective until Congress passes a law to authorize this bill under the Commerce Clause.

Although both bills had mixed testimony, both passed and are now awaiting signature or veto by the Governor, who has traditionally opposed new taxes. But what will she do here?

THE PRESSURE IS ON

The budget is making us frantic. We forget long-term economy building, we forget improving and making government more efficient. All we want to do is tax everything that moves to support a government that doesn't move.

Have we forgotten how important the Internet is to Hawaii? It is the great equalizer. It links us to the mainland and minimizes the isolation we might otherwise feel. It lets us shop as if we were there. Until now, although we’ve had to pay shipping charges, we didn’t have to pay GET.

With our relatively fast wire, it also gives us the opportunity, still largely unrealized, to develop an Internet and online media industry. And it gives our Internet operators the chance to make money by being affiliates of the big national retail sites like Amazon and many others.

ISAAC CHOI TO THE RESCUE

Enter the 2009 legislature, terrified of the budget and looking in every corner for money to balance it. Enter Representative Isaac Choi, accountant in Manoa, known as the arch enemy and assassin of 221, who comes up with another anti-tech idea – taxing the Internet with 1405.

He thinks you just push Amazon around and presto out will pop $20 or $30 million of tax. Not so quick. If he’d thought it through, he’d have realized that it doesn’t work that way at all.

There will be no extra tax – Amazon will just terminate its affiliates in Hawaii, just as it did in New York when this came up. So terminated, the Hawaii online media industry will stop in its tracks, and Amazon will do exactly what it was doing before – not collect Hawaii GET.

1405 does do damage. The Hawaii affiliates will lose lots of income. The state will spend lots of money chasing around trying to find what Amazon is doing, but in the end the state will get no additional taxes, and Amazon will be unaffected. Beyond that, Amazon and the state could also get into a litigation donnybrook over the applicability of the Quill case.

WRONG WAY CORRIGAN

1405 is thoughtless and unworthy. It’s not a good idea in any economy, much less this one. In French, this is called shooting ourselves in the foot, again.

It’s the same thing that happened with 221. With SB199, the legislature mangled the 221 tech tax credit to save tax money. They thought investors would keep on investing anyway, and the startups would have those investments anyway. Wrong. Investors are not stupid – if you take their incentive away, they take their investments away. The economy drops, the startups drop, and the investors go elsewhere, just when we need them most.

How different is that from what 1405 does to our online media industry? It’s the same short-sightedness. Wouldn’t it be a better thing to incentivize tech and the online media industry? If we cut them out, we lose them, and gain nothing. Who’s watching the store, so to speak?

REACTIONS POUR IN

Many people in the industry have objected to 1405, including Dean Takamine of Synertech Media, Roxanne Darling of Bare Feet Studios, Dan Leuck of TechHui, and Burt Lum and Ryan Ozawa of Bytemarks Cafe. The online community has risen up, but as in 221 it may be too little, too late.

It was clear in Amazon’s testimony: “If HB 1405 were enacted, Amazon would have little choice but to end its advertising relationships with Hawaii-based participants in the Amazon Affiliates Program.” Most recently, Amazon has confirmed that it plans to do exactly that on July 1st.

Perhaps the legislature is over-influenced by some of the pro-1405 testimony. We understand the opposition of the Retail Merchants, but why are the unions, the Social Workers Association and the Realtors Association moved to dump on online media? Do they speak for themselves?

Where was the attorney general? He volunteered opinions on bills clearly constitutional, but on 1405, where there are complex constitutional issues, he’s been silent. Do you think advertising by an affiliate is the same thing as a brick and mortar “substantial nexus” under the Quill case?

END OF AN ERA

When you see not one but two bills aimed at the free use of the Internet, you can certainly feel the hot breath of the government all over a special place where government tax and regulation wasn’t necessary or appreciated. Perhaps the day of the free Internet is coming to an end.

One of the best things about Hawaii is that we could order from the Internet and get what we wanted from the mainland, especially things we could not find here, without paying that dreadful GET. However de facto, it was the one refuge from an otherwise plenary and regressive tax.

All this has provoked the State Tax Office to propose amnesty and resurrection of the long-unenforced “use” tax to tax Internet purchases in Hawaii. Clearly, the inviolability of the Internet, and the freedom it has offered, are in great jeopardy. The tax man is coming.

WHAT’S THE LESSON

First, that tax policy must be thoughtful, not rush act. These proliferating nickel and time tax increases, both state and the city, are eating us alive. We have some of the highest taxes in the country. We really ought to think twice and three times before adopting knee jerk increases.

Second, that we have to think tech at all times. Every piece of legislation needs to be tested to see what it will do, pro or con, to diversification to a tech economy. Had this been done here, 1405 would not have passed. We need to incentive the development of our tech industry – it is the most important thing of all. We should not be dumping on it for a few illusory shekels.

How about spending some time showing Forbes it’s wrong? How about supporting business to work our way out of our incredibly bad rep from Superferry? How about some macro planning, and don’t tell me they’re doing that somewhere in DBEDT’s basement. Do we know where we are? Do we know where we’re going? Can we afford this kind of patchwork legislation?

Hopefully, Linda Lingle will exercise her veto. Hopefully, the next session will be better.

The ink isn’t even dry on the March Supreme Court decision that killed Superferry. They moved Alakai to the mainland to stem the loss, and now they’re selling off the gear at auction. And people are buying.

How about a dog kennel, an item that could let you ship your dog with you, casually and without additional charge, on a trip to the neighbor islands. What a wonderful thing that was and would have been, a huge family benefit not otherwise easily available in our times.

These items, symbolic of better times, now broken up and disbursed to the highest bidder. It's sad to see the memory of this benefit walking away at an auction. We must have been crazy to throw all these sweet opportunities away. We will all live to regret what happened.

I’m not questioning the decision of the management to sell the gear. I’m stunned by the schadenfreude, or whatever it is, that makes people come down in droves to bid at an auction that lets them walk away with trophies of a tragedy. Three hundred people showed up, and that's quite a lot.

I wouldn’t have such a trophy in my house.

It’s something like that awful scene in Zorba the Greek where the women, mourners if you will, pick through the items of the decedent, not giving a rip about the decedent, but only the items. A kind of cruel enormity – but nobody’s there to complain.

And that’s what this auction was, a cruel enormity. The message to most of us was, or should have been, that the ferry is over, really over. It’s not coming back any time soon, perhaps in our lifetimes. These items are going to a million places, far away from where they should have been, for away from their rightful place in a new and open model of inter island transportation in our island state.

I suppose it wasn’t the activists that appeared at the auction – that would have been far too ironic. No, it was probably the ordinary people looking for a bargain, the silent majority. I’m sure they were quite excited to come down and make their bids and smiling as they walked away with their prizes.

Had they only showed that kind of energy in supporting the ferry, in countervailing the activists, they might have saved the ferry. Now these bidders have carved out their place in history – they have danced at the funeral.

The bill to resurrect Superferry died too. The government did nothing to even bid this visionary prospect a fond farewell. Now, instead the vultures come to bid for its bones. The tragedy is complete - the pennies are on the eyes. It’s our tragedy, but when will we understand that.

Sadly, if we had the chance, we’d probably do it the same away again. But the likelihood is that we won’t have the chance. Aloha Nui Loa.

In my ThinkTech column on Sunday May 10th, I listed two of the good guys on 221 issues, Senator Carol Fukunaga and Representative Angus McKelvey. But there are many more, on both sides of the aisle, and I should mention them too.

To start, I would give special recognition and thanks to Lynn Finnegan, Cynthia Thielen, Glenn Wakai, Gene Ward and Sylvia Luke, all of whom were publicly courageous and passionate in their acts and deeds in support of industry’s position. We are very appreciative of their efforts.

Thanks to the following 18 House members who supported the floor amendment offered by Glenn Wakai - Representatives Karen Awana, Della Au Belatti, Lyla Berg, Tom Brower, Corinne Ching, Lynn Finnegan, Faye Hanohano, Gilbert Keith-Agaran, Chris Lee, Sylvia Luke, Angus McKelvey, Hermina Morita, Scott Nishimoto, Scott Saiki, Maile Shimabukuro, Cynthia Thielen, Glenn Wakai and Gene Ward.

Thanks to the following 8 Senate members who supported industry’s efforts - Senators Rosalyn Baker, Robert Bunda, Suzanne Chun-Oakland, Carol Fukunaga, Clayton Hee, David Ige, Les Ihara and Sam Slom.

The tech industry is united in its appreciation, and will remember these legislators for their character, courage and clarity in supporting the tech industry despite the complexities of the 2009 session.

Our heart-felt thanks to all of you. We are indebted to you and look forward to working with you on these issues in the future.

The 2009 legislative session is about over and everyone is reeling. For a lot of people, the unsettling results of the session have not even sunk in yet.

This session was a real lulu. We need to understand and evaluate what happened, by whom and why. Otherwise, we'll be doomed to get the same results next year.

The leading point is that 221 got killed or maimed, depending on who you talk to. But there were lots of other tech bills, good and bad, and we need to know about them too.

So ThinkTech Talks is presenting one of our investigative panel programs on the subject. It's a half-day program scheduled for Tuesday, June 4, 2009, starting at 8:30 a.m. for registration and light breakfast and running to lunch with our keynote speaker Ben Cayetano.

There will be two blue ribbon investigative panels:

The first panel, moderated by Barbara Ankersmit, will provide an overview on how this session differed from others, featuring Rep. Gene Ward, Rep. Angus McKelvey, Journalist Jerry Burris, Political Scientist Neal Milner and Lobbyist Bob Toyofuku.

The second panel, moderated by Becki Ward, will discuss specific tech issues, featuring Alicia Maluafiti on biotech, Bill Spencer on venture capital, Rob Harris on environment, Robbie Alm on energy and Jason Lau on film.

What a cast for a drill down discussion!

The program is being produced by ThinkTech, Starr-Tech, Tech Hui, the Hawaii Venture Capital Association and Pacific New Media at the University of Hawaii.

Want to come? Sign up soon, since there are only 55 seats in the brand new [Anthology] Theatre in Pauahi Tower at Bishop Street. Contact for Susan Horowitz at Pacific New Media for information and registration, 956-3422 or 956-8400.

Or just write me, Jay Fidell, at fidell@lava.net

Have you seen "The Soloist"? Great movie, an award winner, but there's more there than just the acting and the the human study. It's about one of the greatest social problems of our times.

An underlying message of the movie, one you can hardly forget watching it, is the homeless in LA. There are 90,000 of them, and they live in a different world, a world without hope. And no one is doing much for them.

There are not as many in Honolulu, but there are thousands anyway, and they also live in a world substantially without hope. No one is doing much for them, and they grow in number.

Barack Obama says if the Japanese can build great hybrids, then why can't we. Well, if we can go to the moon, and build great hybrids, then why can't we solve the homeless problem too.

Some of the threads in the movie could be helpful. People on the street can be helped - it's just a matter of resocializing them, of giving them individual human contact, friends like Mr. Lopez. So little can do so much.

Time works against us. The longer a person is isolated on the street, even a relatively normal person, the more likely he or she is to develop mental illness.

So the mission is to get them off the streets and into places where they can relate to others.

Shelters may work to slow the descent of recent arrivals to the street, but for the long-term street people, we've got to move fast.

Jobs, especially now. A friend of mine suggested that they key was the past, the Depression, where we had federal programs like the CCC (the Civilian Conservation Corps) and the WPA (the Works Progess Administration) and the PWA (Public Works Administration). They built things and their self-esteem in the process.

We've got to get them out rebuilding our trails and parks and our roads and infrastructure. How hard would that be? But we have impediments now that we didn't have in the 1930's. I don't think the unions would like the CCC, the WPA or the PWA these days. And what about all those hiring issues, protections and exposures. How many employers would take the chance?

If we could make it easier for people to hire from the street, more employers would do just that. All we've got to do is develop a program that makes it easy for employers.

A special category of labor, perhaps, that would allow lower wages and excuse employers from certain obligations, would yield more jobs for more people who might not otherwise be able to get a job, especially in these hard times.

Is anyone working on this? It's more than a soup kitchen, it's creating a way of life for people who have no lives except in the street.

Those people in The Soloist were living in the Seventh Circle, and we have people living there too. Instead of ignoring them, or shuttling them around from park to park and shelter to shelter, let's link jobs with food and give them basic housing.

All this is clearly possible. The first thing to do is find out who they are. That would mean getting a database together from the various organizations that feed the homeless and then reaching out and bringing people into a rational and compassionate system. And tracking their progress on that database so no one falls off again.

As in The Soloist, Mr. Avery didn't want to leave his shopping cart and street haunts, but Mr. Lopez did find there were ways to encourage him to do that. We can do the same thing - by offering thoughtful incentives to people you can change their behavior, despite mental illness.

On occasion, you can even reconnect them with the families they left behind, which is a good deed beyond description. There's always a way, even if it's challenging.

Teach for America is a teaching organization that has found a place for bright young kids to get into the system and do profoundly helpful things in the schools. Can't we develop a similar organization that can do good works on the street?

If would be wonderful for everyone involved, and it would be a great statement about Hawaii's big heart for the disadvantaged. If someone asks you to participate in some way, please do.

A recession is the worst of times for the homeless but it's also the best of times to address the problem. What are we waiting for?