STAND. COM. REP. NO. 1239

Honolulu, Hawaii

RE:    H.B. No. 1092

       H.D. 1

       S.D. 2

Honorable Shan S. Tsutsui

President of the Senate

Twenty-Sixth State Legislature

Regular Session of 2011

State of Hawaii

Sir:

     Your Committee on Ways and Means, to which was referred H.B. No. 1092, H.D. 1, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose and intent of this measure is to amend Hawaii tax law to institute improvements and equity among taxpayers.

     More specifically, this measure:

     (1)  Provides for the taxation of the pension income of:

          (A)  An individual filer with federal adjusted gross income of $100,000 or more;

          (B)  A head of household with federal adjusted gross income of $150,000 or more; and

          (C)  A joint or surviving spouse filer with federal adjusted gross income of $200,000 or more; and

     (2)  Makes the deduction for state taxes paid inoperative for corporate taxpayers and the following individual taxpayers:

          (A)  An individual filer with federal adjusted gross income of $75,000 or more;

          (B)  A head of household with federal adjusted gross income of $112,500 or more; and

          (C)  A joint or surviving spouse filer with federal adjusted gross income of $150,000 or more.

     Your Committee received written comments in support of this measure from Kalbert K. Young, Director, Department of Budget and Finance; Frederick D. Pablo, Director, Department of Taxation; Eldon L. Wegner, Ph.D., Policy Advisory Board for Elder Affairs; and Kris Coffield, representing IMUAlliance.

     Your Committee received written comments in opposition to this measure from Susan Goya, Executive Secretary, Retirees Unit, Hawaii Government Employees Association; Paul T. Matsuo, President, Oahu Chapter, Retirees Unit, Hawaii Government Employees Association; Barbara Kim Stanton, State Director, AARP Hawaii; and thirty-eight individuals.

     Your Committee received comments on this measure from David M. Louie, Attorney General, Department of the Attorney General; the Tax Foundation of Hawaii; Barbara Polk, Legislative Chair, Americans for Democratic Action/Hawaii; and two individuals.

     Your Committee finds that a retiree's federal adjusted gross income includes not only a retiree's pension income, but Social Security benefits as well.  Your Committee further finds that it is more prudent and fair to determine the taxability of a retiree's pension income by considering the amount of the retiree's pension income alone.

     Your Committee has amended this measure by:

     (1)  Deleting the tiered threshold provisions, based on federal adjusted gross income, for the taxation of pension income;

     (2)  Providing that taxation of pension income shall apply to pension income in excess of $100,000;

     (3)  Changing the effective date to July 1, 2117, to facilitate further discussion on the measure; and

     (4)  Making technical, nonsubstantive 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 H.B. No. 1092, H.D. 1, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as H.B. No. 1092, H.D. 1, S.D. 2.

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

____________________________

DAVID Y. IGE, Chair