Report Title:

Food Tax Credit

 

Description:

Establishes a food tax credit of up to $70 per qualified exemption. (HB163 HD1)

HOUSE OF REPRESENTATIVES

H.B. NO.

163

TWENTY-FIRST LEGISLATURE, 2001

H.D. 1

STATE OF HAWAII

  

 

A BILL FOR AN ACT

 

RELATING TO FOOD TAX CREDIT.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The purpose of this Act is to reinstitute the food tax credit in the state income tax law. This Act provides a food tax credit of up to $70 per qualified exemption.

In recent years, the legislature has reviewed a number of proposals to exempt purchases of food from the general excise tax. The legislature has never taken that course of action for the simple reason that it is neither the fairest nor the most intelligent means of providing tax relief to Hawaii’s people. Aside from causing extensive rulemaking on the fine points of what "food" is or is not, and burdening retail businesses who would have to differentiate between the taxable and untaxable items, the excise tax exemption would give the largest tax reduction to those who spend the most on the exempt items—the rich. Further, the benefits of the excise tax exemption could not be restricted to local taxpayers, and would thus result in lost revenue from taxes paid by tourists who purchase food.

Before the State’s poor economic condition forced its repeal in the 1990s, the food tax credit played a small but unheralded role in promoting tax fairness and equity. Through this income tax credit, the State effectively returns a distinct portion of excise taxes paid by the neediest local residents on their purchases of food. The legislature finds that Hawaii’s improving economy makes this an opportune time to reduce taxes by reinstituting the food tax credit established in this Act.

SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235- Food tax credit. (a) Each resident individual taxpayer, who files an individual income tax return for a taxable year, and who is not claimed or is not otherwise eligible to be claimed as a dependent by another taxpayer for federal or Hawaii state individual income tax purposes, may claim a food tax credit against the resident taxpayer's individual income tax liability for the taxable year for which the individual income tax return is being filed; provided that a resident individual who has no income or no income taxable under this chapter and who is not claimed or is not otherwise eligible to be claimed as a dependent by a taxpayer for federal or Hawaii state individual income tax purposes may claim this credit.

(b) Each resident individual taxpayer may claim a food tax credit multiplied by the number of qualified exemptions to which the taxpayer is entitled in accordance with the table below; provided that a husband and wife filing separate tax returns for a taxable year for which a joint return could have been filed by them shall claim only the tax credit to which they would have been entitled had a joint return been filed.

Adjusted Gross Income Tax Credit

Under $4,000 $70

$4,000 under $8,000 60

$8,000 under $12,000 50

$12,000 under $16,000 40

$16,000 under $20,000 30

$20,000 under $30,000 20

Over $30,000 0

(c) For the purposes of this section, a "qualified exemption" means those exemptions permitted under this chapter; provided that

    1. No additional exemption may be claimed by a taxpayer who is sixty-five years of age or older;
    2. A person for whom exemption is claimed has physically resided in the State for more than nine months during the taxable year; and
    3. Multiple exemptions shall not be granted because of deficiencies in vision, hearing, or other disability.

For purposes of claiming the credit only, a minor child receiving support from the department of human services of the State, social security survivor's benefits, and the like, may be considered a dependent and a qualified exemption of the parent or guardian.

(d) The tax credit under this section shall not be available to:

    1. Any person who has been convicted of a felony and who has been committed to prison and has been physically confined for the full taxable year;
    2. Any person who would otherwise be eligible to be claimed as a dependent but who has been committed to a youth correctional facility and has resided at the facility for the full taxable year; or
    3. Any misdemeanant who has been committed to jail and has been physically confined for the full taxable year.

(e) The tax credits claimed by a resident taxpayer pursuant to this section shall be deductible from the resident taxpayer's individual income tax liability, if any, for the tax year in which they are properly claimed. If the tax credits claimed by a resident taxpayer exceed the amount of income tax payment due from the resident taxpayer, the excess of credits over payments due shall be refunded to the resident taxpayer; provided that:

    1. Tax credits properly claimed by a residential individual who has no income tax liability shall be paid to the resident individual; and
    2. No refunds or payment on account of the tax credits allowed by this section shall be made for amounts less than $1.

(f) All claims for tax credits under this section, including any amended claims, shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credits may be claimed. Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit."

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 4. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2000.