STAND. COM. REP. NO.925

Honolulu, Hawaii

, 2001

RE: S.B. No. 791

S.D. 1

 

 

Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred S.B. No. 791 entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

The purpose of this measure is to allow a food tax credit against an individual taxpayer's tax liability.

Your Committee received comments on this measure from the Tax Foundation of Hawaii. Testimony opposing the measure was submitted by the Department of Taxation, Department of Budget and Finance, and Hawaii Government Employees Association.

Your Committee finds that a food tax credit provides modest, yet valuable, tax relief for low income taxpayers. Your Committee notes that each $1 of tax credit equals $1 million in tax relief. The food tax credit had been previously repealed in 1998. However, review of this credit by the 1989 Tax Review Commission (TRC) found that it is very successful at providing lower-income individuals with tax relief without severely impacting tax revenues. In addition, the original credit, as well as this credit can be claimed regardless of whether the individual has taxable income or not, thus providing an offset for the general excise taxes paid on food.

As one of the consultants to the 1989 Tax Review Commission said, a food tax credit allows better targeting of tax relief to low income individuals who need the relief rather than a repeal of the tax on food sales. Your Committee finds that the credit concept will result in nonlow income individuals and visitors continuing to pay their fair share of the general excise tax.

At this time, your Committee is considering a food tax credit of $25 multiplied by the number of qualified exemptions to which the taxpayer is entitled. However, for purposes of furthering discussion on this issue, your Committee is recommending that the amount remain blank.

Your Committee further finds that tax relief proposals must be balanced against the fiscal obligations of the State. At the present time, there are ongoing major fiscal issues that will likely resolve themselves in the near future and may require substantial funding by the State. In which case, the tax reductions scheduled to take effect in the 2000 and 2001 taxable years pursuant to section 235-51, Hawaii Revised Statutes, may not be appropriate. In recognition of the fiscal uncertainties, your Committee believes that the personal income tax reductions scheduled pursuant to section 235-51, Hawaii Revised Statutes, should be repealed.

Accordingly, your Committee has amended this measure to repeal the personal income tax reductions that are to be in effect for the 2000 and 2001 taxable years.

As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 791, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 791, S.D. 1, and be placed on the calendar for Third Reading.

Respectfully submitted on behalf of the members of the Committee on Ways and Means,

____________________________

BRIAN T. TANIGUCHI, Chair