Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred S.B. No. 1621 entitled:

begs leave to report as follows:

The purpose of this measure is to provide a vehicle to change the state standard income tax deduction.

The purpose of the standard deduction is to remove low-income households under the poverty line from the burden of paying income taxes, reflecting the philosophy that a certain level of minimum income is necessary for subsistence and should not be subject to tax. The state standard deduction is far lower than the federal standard deduction, resulting in a state income tax at the poverty level that is one of the highest in the nation.

Increasing the amount of the state standard deduction has been one of the major recommendations of all of the state Tax Review Commissions since they were established by the 1978 Constitutional Convention. Your Committee finds that further discussion of the proper amount of the state standard deductions is necessary and is passing this bill to continue the dialogue on this issue.

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. 1621 and recommends that it pass Second Reading and be placed on the calendar for Third Reading.