Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committee on Finance, to which was referred H.B. No. 163 entitled:

begs leave to report as follows:

The purpose of this bill, as received, is to reinstitute the $55 food tax credit in the State Income Tax Law, which would be available to all Hawaii residents without regard to income.

The Department of Taxation testified in opposition to this bill. The Tax Foundation of Hawaii submitted comments.

Your Committee finds that a food tax credit is preferable to a food tax exemption because the exemption may provide greater tax relief for higher-income people who can afford to purchase more food. However, a food tax credit should be targeted to provide relief to lower-income people.

Your Committee has amended this bill by:

1. Deleting its substance and inserting provisions for a food tax credit of up to $70 per qualified exemption; and
2. Amending the effective date to apply to taxable years beginning after December 31, 2000.

Your Committee finds that this bill, as amended, will provide tax relief for the purchase of food by Hawaii's low-income families in a more equitable manner than allowing every Hawaii resident, regardless of income, to receive a $55 food tax credit.

As amended, this bill establishes a graduated food tax credit of $70 per qualified exemption for persons with adjusted gross income under $4,000 to $20 for persons with adjusted gross incomes of $20,000 to 30,000. Persons with adjusted gross incomes in excess of $30,000 would not be able to claim a food tax credit. Since the amount of the tax credit is inversely proportionate to income, the neediest persons will be getting the most generous tax credits.

As affirmed by the record of votes of the members of your Committee on Finance that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 163, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 163, H.D. 1, and be placed on the calendar for Third Reading.