Tax credit dips
Legislators cut a rebate to $1 amid fiscal woes
Last year, low- and moderate-income taxpayers received tax credits ranging from $160 to $70 because the state had collected a surplus for the two previous fiscal years.
But the state's current fiscal problems caused legislators yesterday to lower the tax rebate plan to just a $1 credit.
The state Constitution requires the Legislature to "provide for a tax refund or tax credit to the taxpayers of the state" if revenues exceed the general fund balance for two years in a row.
The Senate had originally discussed a plan similar to last year's, which would have cost about $36 million, but the House offered just a $1 credit and the Senate agreed. Revised Senate Bill 2153 is estimated to be about $1.3 million, according to Sen. Rosalyn Baker, Ways and Means Committee chairwoman.
"Your committee would have loved to recommend a bill larger than this, but we have indications that our economy is problematic.
"This measure is prudent and meets the constitutional provisions," Baker (D, Honokohau-Makena) said yesterday in a floor speech.
Sen. Sam Slom criticized the tax credit, saying the $1 amount indicates "we are not serious about our economy."
"We are saying, 'We will give you a dollar, but we will continue to spend and make the decisions about where your money will go," Slom (R, Diamond Head-Hawaii Kai) said.
The Lingle administration had called for larger tax credit or refund.
"It is not meaningful tax relief," tax director Kurt Kawafuchi said.
"We really believe the House and Senate should have set aside a meaningful amount to help the struggling families," Kawafuchi said.
The Tax Foundation of Hawaii also criticized the plan, noting that the Constitution called for the refunds "rather than allowing bureaucrats to sit on these excess funds."
"While the tax refund may be viewed as tax relief," the foundation said in testimony submitted to the Senate, "It is actually a signal that the state's tax structure is generating more than what is needed to operate state government.
"It is a signal that the tax rates and structure are taking too much in tax dollars from the economy," the foundation added.
