Tax credit plan should be measured against the future

THE ISSUE A bill would let property owners and businesses recoup storm damage costs through an income tax credit.

MANY homeowners and business owners whose properties were damaged during the recent deluge of rain undoubtedly would welcome the state's help to offset the costs of recovery. So would those who were similarly afflicted when floodwaters swept through Manoa two years ago.

State lawmakers and Governor Lingle would like to oblige, offering legislation for a tax credit of as much as $10,000 to everyone who qualifies.

The idea has great appeal. It allots politicians an election-year bonus point while lending financial assistance to taxpayers. It also doesn't require a budget allocation, deferring the cost to the future -- which is where problems with the proposal lie.

Helping individuals and businesses hurt by the recent stretch of bad weather effectively sets a precedent, evident in that the tax credit proposal initially was intended only for damage from the Manoa flood. Should there be another spate of bad weather next month or next year, property owners who suffer then would believe they are entitled to similar compensation.

Moreover, some lawmakers have suggested that the credits be extended to those whose weather-related losses occurred before the Manoa incident, prompting one of the bill's supporters, Rep. Kirk Caldwell, to object that the inclusion could have too "dramatic" a fiscal effect.

Tax Director Kurt Kawafuchi, whom Lingle directed to propose the credit, estimates that 9,500 individuals and businesses were affected by the six weeks of rain, mudslides and flooding. At $10,000 each, the hit to the state treasury could reach $9.5 million, he says, but with filing for claims open until December 2007, the revenue curtailment won't come due until later.

For those seeking the credit, the paperwork will be formidable, but for the tax department, figuring who is eligible and for how much will be even more so. To guard against fraud, the agency will have to determine that claimants did not recover losses through other means, such as federal assistance or grants from charities, and that applicants have complied with myriad Internal Revenue Service codes and other government statutes and regulations.

But Kawafuchi -- who last month complained that workers in his department already are burdened with "hardship and burnout" and would be hard-pressed to collect an excise tax surcharge for the city's transit system -- oddly seems to have no objection to adding these tasks to his agency's "very full" plate.

The state's current revenue flush allows politicians to loosen the purse strings, and the credits might well be needed by storm victims. However, the proposal needs further consideration, not just for the present but for the hereafter.