SB1822

SECTION 1. The legislature finds that general excise tax and sales tax on food are regressive taxes that disproportionately affect the poor because those with the lowest incomes often spend the largest proportion of their income on food. The average expenditure for food consumed at home is approximately $2,335 per person per year, based on the State of Hawaii Data Book for 2004. Creating an exemption for certain food items decreases revenues because those who can afford certain food items and visitors will no longer be paying taxes on these items. Furthermore, exempting certain food items does little to change the regressive nature of the tax and does not truly assist low-income residents. For example, foods used as the bases for the exemption are often available to low-income residents through the WIC program. It is estimated that forty per cent of the children born in Hawaii are WIC program participants. Furthermore, many of the foods slated for exemption may not be considered staple foods in many local communities. For instance, rice would not be included in a WIC-program-based exemption.

The legislature finds that the more appropriate way to address this issue is to create a food tax credit for low-income residents. A food tax credit for residents earning less than $30,000 will provide tax relief to almost fifty per cent of the population, while still allowing residents to retain their local diet.

The purpose of this Act is to create a food tax credit for the benefit of low-income residents.

SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235- Food tax credit. (a) Each resident individual taxpayer, who files an individual income tax return for a taxable year, and who is not claimed or is not otherwise eligible to be claimed as a dependent by another taxpayer for federal or Hawaii state individual income tax purposes, may claim a food tax credit, as provided in subsection (b), against the resident taxpayer's individual income tax liability for the taxable year for which the individual income tax return is being filed; provided that a resident individual who has no income or no income taxable under this chapter and who is not claimed or otherwise eligible to be claimed as a dependent by a taxpayer for federal or Hawaii state individual income tax purposes may claim this credit.

(b) Each resident taxpayer with an adjusted gross income of less than $30,000, may claim a tax credit of $100, multiplied by the number of qualified exemptions to which the taxpayer is entitled; provided that no additional tax credit shall be claimed because of age; provided further that a husband and wife filing separate tax returns for a taxable year for which a joint return could have been filed by them shall claim only the tax credit to which they would have been entitled.

(c) For purposes of this section, a qualified exemption is defined to include those exemptions permitted under this chapter; provided that a person for whom the exemption is claimed has physically resided within the State for more than nine months during the taxable year; and provided further that multiple exemptions shall not be granted because of deficiencies in vision or hearing, or other disability. For purposes of claiming the credit only, a minor child receiving support from the department of human services of the State, social security survivor's benefits, and the like, may be considered a dependent and a qualified exemption of the parent or guardian.

(d) The tax credit under this section shall not be available to:

(1) Any person who has been convicted of a felony and who has been committed to prison and has been physically confined for the full taxable year;

(2) Any person who would otherwise be eligible to be claimed as a dependent but who has been committed to a youth correctional facility and has resided at the facility for the full taxable year; or

(3) Any misdemeanant who has been committed to jail and has been physically confined for the full taxable year.

(e) The tax credit claimed by a resident taxpayer pursuant to this section shall be deductible from the resident taxpayer's individual income tax liability, if any, for the tax year in which they are properly claimed. If the tax credit claimed by a resident taxpayer exceeds the amount of income tax payment due from the resident taxpayer, the excess of credits over payments due shall be refunded to the resident taxpayer; provided that a tax credit properly claimed by a resident individual who has no income tax liability shall be paid to the resident individual; and provided further that no refunds or payment on account of the tax credit allowed by this section shall be made for amounts less than $1.

(f) All claims for a tax credit under this section, including any amended claims, must be filed on or before the end of the twelfth month following the close of the taxable year for which the credits may be claimed. Failure to comply with this provision shall constitute a waiver of the right to claim the credit.

(g) The director of taxation shall prepare any forms that may be necessary to claim a tax credit under this section. The director may also require the taxpayer to provide reasonable information to ascertain the validity of the claim for credit made under this section and may adopt rules necessary to effectuate the purposes of this section pursuant to chapter 91."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2006.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	1822
TWENTY-FOURTH LEGISLATURE, 2007
STATE OF HAWAII