Chair Carroll, Vice-Chair Kobayashi, Members of the Committee:
The League of Women Voters of Hawaii supports the intent of SB2202, SD1 which would increase the refundable food/excise tax credit and tie future increases to the increase in the Consumer Price Index (CPI). SB2202 SD1 leaves the amount of the food/excise tax credit unspecified and provides an implementation date of 2050, as well as correcting the unconstitutional restriction of length of residency of the taxpayer and some technicalities.
As written, the League cannot support SB2202 SD1 because we don’t know if the credits will actually be increased.
We regret very much the deletion of indexing to the CPI. We note that no one who testified on SB2202, SD1 opposed the idea of adjusting the credits upward to account for inflation. The Department of Taxation recommended a flat amount of annual increase rather than applying the CPI; their reasoning that using the CPI would be difficult for the Department is puzzling. The CPI, easily available, is stated as a percentage which should be easily applied to the credit amount in the past year. Possibly the Department’s present computer system makes inputting the percentage of increase difficult. Either re-programming the computer software, or using a relatively simple “work-around” strategy, could overcome this objection and retain the desirable indexing to inflation. Increases by flat amounts also fall in value over time, due to inflation.
The Standing Committee Report by the Committee on Ways and Means contains no explanation of why this important part of SB2202, SD 1 was deleted. We can easily see the importance of building in such an inflation adjustment, when we consider the decrease in value to the 2013 taxpayer of the amounts specified in 2007. Just in terms of legislators’ time and energy, an automatic increase would save the effort of revisiting the amount of credit every few years.
The League believes that public policy should promote self-sufficiency, and the preponderance of research demonstrates that the most effective social programs to address health, education, and decrease use of social services are those designed to prevent or reduce poverty.
Hawai`i’s GET, with its universal reach and pyramiding, is very regressive – the poor pay a much greater share of their income in taxes due largely to the GET. Providing some relief via an increase in the refundable food/excise tax credit is an obvious way to compensate our neediest families.
As to the amount of increase, it seems only fair to restore the value of the credit in 2007, in 2013 dollars. Sadly the depth of poverty experienced by the poorest families has increased over this time frame. Surely we can find the will to assist these struggling families recoup the extra burden they face in the GET.
It is worth noting that those benefitting from an increased credit will undoubtedly spend the amount they gain quickly, on basic necessities – contributing a portion of what they have received back to the general fund via the GET, while also boosting the local economy.
We believe that this hearing, and others in the 2014 Legislature, will suffice to discuss this important measure. We recommend that you restore the indexing to the CPI, restore the amount of credit increase in SB2202 (sufficient to provide equal value as was provided in 2007), and provide an implementation date no later than 2016.
Thank you for the opportunity to submit testimony.