Revises income tax brackets. (SB1740 HD1)

A BILL FOR AN ACT

SECTION 1. According to the tax review commission's most recent report of 2002, the state income tax brackets are so compressed that people on public assistance pay income taxes, while the highest rate for married taxpayers filing jointly begins when their taxable income reaches just over $80,000. Today, the median income of a family of four in Hawaii, with both parents working, is approximately $70,000. This means that if this hypothetical middle-class family earned only $900 more each month, the family would be taxed in the same bracket as a family with an annual income of $900,000.

The legislature finds that the current Hawaii income taxation tables actually impose a financial penalty on most middle-class families in Hawaii. Furthermore, comparisons with the average income in other states are meaningless when the consumer price index in Hawaii for housing, food, clothing, education, and transportation is factored in. In reality, a $70,000 family income in Hawaii buys much less than a $70,000 family income in most other states. Hawaii's income tax brackets need to reflect this reality.

The legislature finds that the tax brackets need to be adjusted to bring the tax laws more in line with the economic realities of the high cost of living in Hawaii and to bring long-term tax relief to low- and middle-income families.

The purpose of this Act is to provide for equitable income taxation that accounts for the ability to pay taxes by income bracket.

SECTION 2. Section 235-51, Hawaii Revised Statutes, is amended by amending subsections (a), (b), (c), and (d) to read as follows:

"(a) There is hereby imposed on the taxable income of: (1) every taxpayer who files a joint return under section 235-93; and (2) every surviving spouse a tax determined in accordance with the following table:

[In the case of any taxable year beginning after December 31, 1998:

If the taxable income is: The tax shall be:

Not over $4,000 1.60% of taxable income

Over $4,000 but $64.00 plus 3.90% of

not over $8,000 excess over $4,000

Over $8,000 but $220.00 plus 6.80% of

not over $16,000 excess over $8,000

Over $16,000 but $764.00 plus 7.20% of

not over $24,000 excess over $16,000

Over $24,000 but $1,340.00 plus 7.50% of

not over $32,000 excess over $24,000

Over $32,000 but $1,940.00 plus 7.80% of

not over $40,000 excess over $32,000

Over $40,000 but $2,564.00 plus 8.20% of

not over $60,000 excess over $40,000

Over $60,000 but $4,204.00 plus 8.50% of

not over $80,000 excess over $60,000

Over $80,000 $5,904.00 plus 8.75% of

excess over $80,000

In the case of any taxable year beginning after December 31, 2000:

If the taxable income is: The tax shall be:

Not over $4,000 1.50% of taxable income

Over $4,000 but $60.00 plus 3.70% of

not over $8,000 excess over $4,000

Over $8,000 but $208.00 plus 6.40% of

not over $16,000 excess over $8,000

Over $16,000 but $720.00 plus 6.90% of

not over $24,000 excess over $16,000

Over $24,000 but $1,272.00 plus 7.30% of

not over $32,000 excess over $24,000

Over $32,000 but $1,856.00 plus 7.60% of

not over $40,000 excess over $32,000

Over $40,000 but $2,464.00 plus 7.90% of

not over $60,000 excess over $40,000

Over $60,000 but $4,044.00 plus 8.20% of

not over $80,000 excess over $60,000

Over $80,000 $5,684.00 plus 8.50% of

excess over $80,000]

In the case of any taxable year beginning after December 31, 2001:

If the taxable income is: The tax shall be:

Not over $4,000 1.40% of taxable income

Over $4,000 but $56.00 plus 3.20% of

not over $8,000 excess over $4,000

Over $8,000 but $184.00 plus 5.50% of

not over $16,000 excess over $8,000

Over $16,000 but $624.00 plus 6.40% of

not over $24,000 excess over $16,000

Over $24,000 but $1,136.00 plus 6.80% of

not over $32,000 excess over $24,000

Over $32,000 but $1,680.00 plus 7.20% of

not over $40,000 excess over $32,000

Over $40,000 but $2,256.00 plus 7.60% of

not over $60,000 excess over $40,000

Over $60,000 but $3,776.00 plus 7.90% of

not over $80,000 excess over $60,000

Over $80,000 $5,356.00 plus 8.25% of

excess over $80,000.

In the case of any taxable year beginning after December 31, 2005:

If the taxable income is: The tax shall be:

Not over $8,000 $0

Over $8,000 but $56.00 plus 3.20% of

not over $16,000 excess over $8,000

Over $16,000 but $184.00 plus 5.50% of

not over $24,000 excess over $16,000

Over $24,000 but $624.00 plus 6.40% of

not over $32,000 excess over $24,000

Over $32,000 but $1,136.00 plus 6.80% of

not over $40,000 excess over $32,000

Over $40,000 but $1,680.00 plus 7.20% of

not over $60,000 excess over $40,000

Over $60,000 but $2,256.00 plus 7.60% of

not over $80,000 excess over $60,000

Over $80,000 but $3,776.00 plus 7.90% of

not over $100,000 excess over $80,000

Over $100,000 $5,356 plus 8.25% of

excess over $100,000.

(b) There is hereby imposed on the taxable income of every head of a household a tax determined in accordance with the following table:

[In the case of any taxable year beginning after December 31, 1998:

If the taxable income is: The tax shall be:

Not over $3,000 1.60% of taxable income

Over $3,000 but $48.00 plus 3.90% of

not over $6,000 excess over $3,000

Over $6,000 but $165.00 plus 6.80% of

not over $12,000 excess over $6,000

Over $12,000 but $573.00 plus 7.20% of

not over $18,000 excess over $12,000

Over $18,000 but $1,005.00 plus 7.50% of

not over $24,000 excess over $18,000

Over $24,000 but $1,455.00 plus 7.80% of

not over $30,000 excess over $24,000

Over $30,000 but $1,923.00 plus 8.20% of

not over $45,000 excess over $30,000

Over $45,000 but $3,153.00 plus 8.50% of

not over $60,000 excess over $45,000

Over $60,000 $4,428.00 plus 8.75% of

excess over $60,000

In the case of any taxable year beginning after December 31, 2000:

If the taxable income is: The tax shall be:

Not over $3,000 1.50% of taxable income

Over $3,000 but $45.00 plus 3.70% of

not over $6,000 excess over $3,000

Over $6,000 but $156.00 plus 6.40% of

not over $12,000 excess over $6,000

Over $12,000 but $540.00 plus 6.90% of

not over $18,000 excess over $12,000

Over $18,000 but $954.00 plus 7.30% of

not over $24,000 excess over $18,000

Over $24,000 but $1,392.00 plus 7.60% of

not over $30,000 excess over $24,000

Over $30,000 but $1,848.00 plus 7.90% of

not over $45,000 excess over $30,000

Over $45,000 but $3,033.00 plus 8.20% of

not over $60,000 excess over $45,000

Over $60,000 $4,263.00 plus 8.50% of

excess over $60,000]

In the case of any taxable year beginning after December 31, 2001:

If the taxable income is: The tax shall be:

Not over $3,000 1.40% of taxable income

Over $3,000 but $42.00 plus 3.20% of

not over $6,000 excess over $3,000

Over $6,000 but $138.00 plus 5.50% of

not over $12,000 excess over $6,000

Over $12,000 but $468.00 plus 6.40% of

not over $18,000 excess over $12,000

Over $18,000 but $852.00 plus 6.80% of

not over $24,000 excess over $18,000

Over $24,000 but $1,260.00 plus 7.20% of

not over $30,000 excess over $24,000

Over $30,000 but $1,692.00 plus 7.60% of

not over $45,000 excess over $30,000

Over $45,000 but $2,832.00 plus 7.90% of

not over $60,000 excess over $45,000

Over $60,000 $4,017.00 plus 8.25% of

excess over $60,000.

In the case of any taxable year beginning after December 31, 2005:

If the taxable income is: The tax shall be:

Not over $6,000 $0

Over $6,000 but $42.00 plus 3.20% of

not over $12,000 excess over $6,000

Over $12,000 but $138.00 plus 5.50% of

not over $18,000 excess over $12,000

Over $18,000 but $468.00 plus 6.40% of

not over $24,000 excess over $18,000

Over $24,000 but $852.00 plus 6.80% of

not over $30,000 excess over $24,000

Over $30,000 but $1,260.00 plus 7.20% of

not over $45,000 excess over $30,000

Over $45,000 but $1,692.00 plus 7.60% of

not over $60,000 excess over $45,000

Over $60,000 but $2,832.00 plus 7.90% of

not over $80,000 excess over $60,000

Over $80,000 $4,017.00 plus 8.25% of

excess over $80,000.

(c) There is hereby imposed on the taxable income of: (1) every unmarried individual (other than a surviving spouse, or the head of a household); and (2) [on the taxable income of] every married individual who does not make a single return jointly with the individual's spouse under section 235-93, a tax determined in accordance with the following table:

[In the case of any taxable year beginning after December 31, 1998:

If the taxable income is: The tax shall be:

Not over $2,000 1.60% of taxable income

Over $2,000 but $32.00 plus 3.90% of

not over $4,000 excess over $2,000

Over $4,000 but $110.00 plus 6.80% of

not over $8,000 excess over $4,000

Over $8,000 but $382.00 plus 7.20% of

not over $12,000 excess over $8,000

Over $12,000 but $670.00 plus 7.50% of

not over $16,000 excess over $12,000

Over $16,000 but $970.00 plus 7.80% of

not over $20,000 excess over $16,000

Over $20,000 but $1,282.00 plus 8.20% of

not over $30,000 excess over $20,000

Over $30,000 but $2,102.00 plus 8.50% of

not over $40,000 excess over $30,000

Over $40,000 $2,952.00 plus 8.75% of

excess over $40,000

In the case of any taxable year beginning after December 31, 2000:

If the taxable income is: The tax shall be:

Not over $2,000 1.50% of taxable income

Over $2,000 but $30.00 plus 3.70% of

not over $4,000 excess over $2,000

Over $4,000 but $104.00 plus 6.40% of

not over $8,000 excess over $4,000

Over $8,000 but $360.00 plus 6.90% of

not over $12,000 excess over $8,000

Over $12,000 but $636.00 plus 7.30% of

not over $16,000 excess over $12,000

Over $16,000 but $928.00 plus 7.60% of

not over $20,000 excess over $16,000

Over $20,000 but $1,232.00 plus 7.90% of

not over $30,000 excess over $20,000

Over $30,000 but $2,022.00 plus 8.20% of

not over $40,000 excess over $30,000

Over $40,000 $2,842.00 plus 8.50% of

excess over $40,000]

In the case of any taxable year beginning after December 31, 2001:

If the taxable income is: The tax shall be:

Not over $2,000 1.40% of taxable income

Over $2,000 but $28.00 plus 3.20% of

not over $4,000 excess over $2,000

Over $4,000 but $92.00 plus 5.50% of

not over $8,000 excess over $4,000

Over $8,000 but $312.00 plus 6.40% of

not over $12,000 excess over $8,000

Over $12,000 but $568.00 plus 6.80% of

not over $16,000 excess over $12,000

Over $16,000 but $840.00 plus 7.20% of

not over $20,000 excess over $16,000

Over $20,000 but $1,128.00 plus 7.60% of

not over $30,000 excess over $20,000

Over $30,000 but $1,888.00 plus 7.90% of

not over $40,000 excess over $30,000

Over $40,000 $2,678.00 plus 8.25% of

excess over $40,000.

(d) The tax imposed by section 235-2.45 on estates and trusts shall be determined in accordance with the following table:

[In the case of any taxable year beginning after December 31, 1998:

If the taxable income is: The tax shall be:

Not over $2,000 1.60% of taxable income

Over $2,000 but $32.00 plus 3.90% of

not over $4,000 excess over $2,000

Over $4,000 but $110.00 plus 6.80% of

not over $8,000 excess over $4,000

Over $8,000 but $382.00 plus 7.20% of

not over $12,000 excess over $8,000

Over $12,000 but $670.00 plus 7.50% of

not over $16,000 excess over $12,000

Over $16,000 but $970.00 plus 7.80% of

not over $20,000 excess over $16,000

Over $20,000 but $1,282.00 plus 8.20% of

not over $30,000 excess over $20,000

Over $30,000 but $2,102.00 plus 8.50% of

not over $40,000 excess over $30,000

Over $40,000 $2,952.00 plus 8.75% of

excess over $40,000

In the case of any taxable year beginning after December 31, 2000:

If the taxable income is: The tax shall be:

Not over $2,000 1.50% of taxable income

Over $2,000 but $30.00 plus 3.70% of

not over $4,000 excess over $2,000

Over $4,000 but $104.00 plus 6.40% of

not over $8,000 excess over $4,000

Over $8,000 but $360.00 plus 6.90% of

not over $12,000 excess over $8,000

Over $12,000 but $636.00 plus 7.30% of

not over $16,000 excess over $12,000

Over $16,000 but $928.00 plus 7.60% of

not over $20,000 excess over $16,000

Over $20,000 but $1,232.00 plus 7.90% of

not over $30,000 excess over $20,000

Over $30,000 but $2,022.00 plus 8.20% of

not over $40,000 excess over $30,000

Over $40,000 $2,842.00 plus 8.50% of

excess over $40,000]

In the case of any taxable year beginning after December 31, 2001:

If the taxable income is: The tax shall be:

Not over $2,000 1.40% of taxable income

Over $2,000 but $28.00 plus 3.20% of

not over $4,000 excess over $2,000

Over $4,000 but $92.00 plus 5.50% of

not over $8,000 excess over $4,000

Over $8,000 but $312.00 plus 6.40% of

not over $12,000 excess over $8,000

Over $12,000 but $568.00 plus 6.80% of

not over $16,000 excess over $12,000

Over $16,000 but $840.00 plus 7.20% of

not over $20,000 excess over $16,000

Over $20,000 but $1,128.00 plus 7.60% of

not over $30,000 excess over $20,000

Over $30,000 but $1,888.00 plus 7.90% of

not over $40,000 excess over $30,000

Over $40,000 $2,678.00 plus 8.25% of

excess over $40,000."

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

SECTION 4. This Act shall take effect on July 1, 2010.