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. 854 entitled:

begs leave to report as follows:

The purpose of this measure is to provide a twenty per cent earned income tax credit to resident taxpayers; and to require the Department of Taxation to include annual statistical information in its reports on tax credits.

Your Committee received testimony in support of this measure from the Department of Human Services, Hawaii State Commission on the Status of Women, American Friends Service Committee, and Kokua Council. The Department of Taxation submitted testimony in opposition. The Tax Foundation of Hawaii submitted comments.

Your Committee finds that the federal government and fifteen states currently have an earned income tax credit. While there have been some initial problems with implementation, the programs have remained.

Your Committee has heard the concerns of the Department of Taxation regarding possible fraudulent claims and the expense of administering the program. Your Committee is supportive of the program, and the benefits it would provide to Hawaii residents, but believes the concerns of the Department should be taken into consideration.

Your Committee has amended this measure to replace the twenty per cent figure with an unspecified amount for the purposes of further discussion. Your Committee has also added a number of additional sections, made conforming amendments to these sections to reflect changes in federal and state tax law, and made technical changes to reflect the preferred drafting style.

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. 854, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 854, S.D. 1, and be placed on the calendar for Third Reading.