Target relief at Hawaii taxpayers who are most in need
Gov. Linda Lingle has said she will propose "very targeted tax relief" at this year's Legislature.
Scrooge-like relief can be claimed next year by low- and middle-income Hawaii taxpayers because of laws enacted by the 2007 Legislature. Lawmakers in this year's session should give special and more substantial relief to low-income families in the form of earned income tax credits.
Hawaii residents making less than $60,000 this year will be able to shave $70 to $160 off their tax bills in the form of refunds from their state income taxes. The state Constitution requires the state give refunds after revenues exceed the general fund balance by at least 5 percent for two consecutive years. The implementation approved by last year's Legislature deprived those making more than $60,000 from receiving any refunds.
Another law that takes effect this year provides for credit on food excise taxes ranging from $25 to $85 for those making up to $50,000. Together, the refund and tax credit will temporarily bring the tax bill for a one-parent family of three at the poverty line from $294 to $109, making Hawaii the fifth-cruelest state rather than remaining the most merciless.
Gov. Linda Lingle has said she will introduce three proposals this year for "very targeted tax relief" but has declined to be specific, saving the details for her State of the State address this month. She has said only that "it's not in the range that I've been able to propose in previous years."
In 2006, Lingle signed into law tax provisions costing $49 million, including the raising of tax bracket thresholds, resulting in a cut of less than $80 for families of three at the poverty line, who had been paying $373 in income taxes.
Last year's Legislature rejected Lingle's proposals to increase the standard deduction, which would reduce taxes on the working poor, and index tax rates for inflation. Lawmakers also turned down a proposed earned income tax credit based on a federal tax rebate and wage supplement enacted by a Democratic Congress in 1975 and praised since then by all Republican presidents.
The federal credit reduces or eliminates taxes on low-
income working people, even providing a subsidy for some. Proposals considered by last year's Legislature would have created a similar state credit, amounting to 20 percent of the federal credit.
Kurt Kawafuchi, the state tax director, maintains that it would affect too few taxpayers, is prone to error and is not user-friendly. However, a state tax commission in December 2006 found that 72,000 individual or family tax
filers - 22.3 percent of those with incomes of less than $30,000 - claimed the federal earned income tax credit. Figuring the state credit would simply involve taking the approved percentage of the federal credit.