Report Title:

Food Tax Credit

 

Description:

Authorizes a food tax credit of $55 to resident taxpayers and their dependents.

HOUSE OF REPRESENTATIVES

H.B. NO.

163

TWENTY-FIRST LEGISLATURE, 2001

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO FOOD TAX CREDIT.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The purpose of this Act is to reinstitute the food tax credit in the state income tax law. In so doing, this Act allows every resident individual a $55 tax credit even if they have no income and are not claimed or eligible to be claimed as dependents by another taxpayer.

In recent years, the legislature has reviewed a number of proposals to exempt purchases of food from the general excise tax. The legislature has never taken that course of action for the simple reason that it is neither the fairest nor the most intelligent means of providing tax relief to Hawaii’s people. Aside from causing extensive rulemaking on the fine points of what is "food" and what is not, and burdening retail businesses who would have to differentiate between the taxable and untaxable items, the excise tax exemption would give the largest tax reduction to those who spend the most on the exempt items—the rich. Further, the benefits of the excise tax exemption could not be restricted to local taxpayers, and would thus result in lost revenue from taxes paid by tourists who purchase food.

Before the State’s poor economic condition forced its repeal in the 1990s the food tax credit played a small but unheralded role in promoting tax fairness and equity. Through this income tax credit, the State effectively returns a distinct portion of excise taxes paid by local residents on their purchases of food. The benefit is conferred upon all residents because even a resident with no taxable income can receive the $55 credit simply by filing a tax return. The flat nature of the credit generally results in lower income people having a higher percentage of their taxes offset, which the legislature finds is a fairer and more equitable means of providing tax relief. Hawaii’s improving economy makes this an opportune time to reduce taxes by reinstituting the food tax credit set forth in this Act.

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 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 is not 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) Every resident individual taxpayer may claim a tax credit of $55 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; and 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 may each claim $55.

(c) For the purposes of this section, a qualified exemption is defined to include those exemptions permitted under this chapter; provided that a person for whom exemption is claimed has physically resided in 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 credits claimed by a resident taxpayer exceed 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 tax credits 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 credits allowed by this section shall be made for amounts less than $1.

(f) All claims for tax credits 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 the foregoing provision shall constitute a waiver of the right to claim the credit."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval.

INTRODUCED BY:

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