STAND

STAND. COM. REP. NO. 733

Honolulu, Hawaii

, 2005

RE: S.B. No. 1415

S.D. 1

Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred S.B. No. 1415 entitled:

"A BILL FOR AN ACT RELATING TO EARNED INCOME TAX CREDITS,"

begs leave to report as follows:

The purpose of this measure is to encourage more eligible families in Hawaii to claim the federal earned income tax credit.

Specifically, this bill creates a three-year pilot program in the Department of Taxation to:

(1) Provide free tax counseling and income tax return preparation for these low-income persons;

(2) Implement an informational campaign to educate the public about the availability of the credit, the eligibility requirements, and procedures for claiming the credit; and

(3) Provide outreach services to target populations such as families making the transition from welfare to work, non-English speakers, and families with hanai children.

The program is to be operated with a grant to Aloha United Way for the first two years and by a private contractor chosen by bid proposals for the third year. The payment to the contractor is set at twenty per cent of the total amount of the federal earned income tax credit claimed by assisted tax filers. Aloha United Way and the contractor are to report to the Department of Taxation on the program's accomplishments to enable the Department to submit a report of the program's results to the Legislature before the convening of the Regular Session of 2008.

Your Committee believes that the program is a worthwhile investment and that if the federal earned income tax credits were increased by only ten per cent, more than $3,000,000 may be added to the State's economy. With a utilization multiplier of five, this additional $3,000,000 in the economy would generate approximately $625,000 in additional excise taxes and also stimulate economic activity and result in job creation.

Your Committee has amended this bill by:

(1) Changing the appropriation to an unspecified amount in section 3 to promote further discussion, as well as deleting the mention of the appropriated figure in section 2 on p. 5, lines 3 and 13;

(2) Clarifying that the appropriation is a grant pursuant to chapter 42F, Hawaii Revised Statutes; and

(3) Making technical amendments for the purposes of clarity and 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. 1415, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1415, S.D. 1, and be placed on the calendar for Third Reading.

Respectfully submitted on behalf of the members of the Committee on Ways and Means,

		____________________________ BRIAN T. TANIGUCHI, Chair