Military tax proposal
‘redundant’Lingle's exemption for
Hawaii soldiers in combat zones
already exists, an expert says
During her State of the State address to the Legislature last month, Gov. Linda Lingle received sustained applause when she proposed that Hawaii soldiers deployed to combat zones be exempted from paying state taxes.
There's one catch to her request that the Legislature join her "in showing our citizen soldiers and their families how much they are appreciated by passing this piece of legislation, and passing it quickly": The exemption already exists -- a product of the federal tax exemption granted by Congress during the Gulf War in 1991, according to Lowell Kalapa, president of the Tax Foundation of Hawaii.
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As it does annually, the Legislature the following year approved a "tax conformity" bill that keeps Hawaii's tax code generally in line with the federal tax code to make it simpler to file state tax returns. It incorporated the federal tax break so combat soldiers also get a state tax break, according to Kalapa.
"Thus, this proposal is unnecessary, if not redundant," Kalapa told House and Senate committees considering the measure that tax officials estimated would cost the state about $200,000.
He noted that a state Department of Taxation information release on April 11, 2003, advised that combat pay is exempt from state taxation and that those serving in combat zones get a 180-day extension of state tax deadlines, also called for in the Lingle bill.
After a hearing yesterday, House Public Safety and Military Affairs Committee Chairman Ken Ito (D, Heeia-Kaneohe) deferred a decision on the administration bill until state Tax Director Kurt Kawafuchi and state Adjutant General Robert Lee could research Kalapa's information.
Kawafuchi declined to comment on the issue until he had researched the tax laws.
Even if it is redundant now, under the administration bill the Hawaii tax exemption for soldiers in combat zones would remain in place should the federal tax exemption be eliminated in the future.
