Tax legislation would not end Hawaii's miserly policies

THE ISSUE State legislative leaders have approved bills that would give tax rebates and credits to low- and moderate-income taxpayers.

HAWAII'S robust economy and a state budget surplus provided an opportunity to give tax refunds to all taxpayers and special relief to low-income families. The Legislature instead is set to approve miserly tax measures that will give modest relief to those struggling to make ends meet and deprive middle- and upper-income families of any refund.

The state Constitution requires the state to give tax refunds whenever revenues exceed the general fund balance by at least 5 percent for two consecutive years. Previous legislators have distributed the refunds equally among all taxpayers.

Perhaps reeling from harsh criticism that Hawaii's tax policy is the meanest toward the working poor, legislative leaders have chosen to distribute refunds ranging from $90 for taxpayers with incomes this year of $50,000 to $60,000 to $160 for those who make less than $5,000. Those who make more than $60,000 won't get a dime.

In a separate bill, the Legislature is poised to approve permanent tax credits based on excise taxes paid by taxpayers. The amounts will range from $25 for taxpayers making $40,000 to $50,000 to $85 for those earning less than $5,000.

Legislators again thumbed their noses at a proposed earned income tax credit based on a federal tax rebate and wage supplement enacted by a Democratic Congress in 1975. President Ronald Reagan described it as "the best anti-poverty, the best pro-family, the best job- creation measure to come out of Congress."

Hawaii's tax bill for a one-parent family of three at the poverty line of $16,222 is $294, the nation's most merciless among the 42 states that tax incomes, according to the Washington-based Center on Budget Priorities. The tax refund and food excise tax credit together will temporarily bring the tax down to $109, the nation's fifth cruelest -- hardly something to brag about.

Gov. Linda Lingle had proposed tax reductions of $60 million, including increasing the standard deduction, a tax exemption for families with incomes of up to $100,000 and indexing of tax rates for inflation. She supported the food tax credit.

The two bills headed for passage are estimated to cost $49 million. For less than half that amount, the Legislature could have enacted an earned income tax credit, based on 20 percent of the federal amounts, providing a rebate of $558 rather than the $294 bill. That would have made Hawaii one of the 10 most compassionate states toward the working poor.

The state then could have used the other half of the package to give $47 refunds to all taxpayers, which is only fair. While the Constitution is not explicit, most taxpayers understandably have come to expect refunds, however small, when the taxes they paid have been shown to be more than were needed.