Where’s Your Second Tax Return?  Part 2

by Tom Yamachika, President, Tax Foundation Hawaii

A couple of weeks ago, we spotlighted a bill, House Bill 2429, that essentially would have forced taxpayers to file a second, publicly available, tax return upon pain of losing the benefit of most income tax credits and all general excise tax and use tax exemptions and deductions.  This bill, if passed in that form, would have broad implications because there are GET exemptions and exclusions that most people don’t even think about, such as the exemption for salaries and wages.  A person who earns a salary and doesn’t file the second public tax return, for example, would be subject to GET on his or her salary.

The last committee to consider the bill with public input was the Senate Ways and Means Committee.  In accord with that committee’s normal practice, the committee did not hold a hearing on the bill because a previous Senate committee had already heard it.  Instead, WAM held a decision-making meeting where written testimony could be submitted but oral testimony was not taken.

We submitted testimony on this bill.  We made the same arguments we made in this space before, and even attached a copy of our previous Weekly Commentary that ended with:  “Someone needs to rewrite this bill or put it out of its misery.”

We also did something unusual.  We rewrote the bill.  We wrote a draft that got rid of the parts of the bill requiring second tax returns and public disclosure.  We replaced them with provisions that would allow DBEDT to conduct a study of tax expenditures with the information that is already on tax returns, like how the federal government allows the Department of Commerce to access IRS tax return data.  We put the redraft in our testimony.

WAM adopted our redraft.

The committee report doesn’t say much about our contribution.  The committee report states simply, “Accordingly, your Committee has amended this measure by:  (1)  Deleting language requiring:  (A)  Taxpayers to file tax expenditure disclosure forms as a condition for claiming certain income tax credits and general excise tax and use tax exemptions; and (B)  The Department of Business, Economic Development, and Tourism to use information from the tax expenditure disclosure forms in their evaluation of the effectiveness of tax expenditures; and (2)  Instead, authorizing Department of Business, Economic Development, and Tourism staff who are conducting an evaluation of tax expenditures to examine income tax, general excise tax, and use tax returns.”

In the decision-making meeting, however, Chair Dela Cruz said:  “Recommendation is to pass with amendments, to take the Tax Foundation’s amendments in testimony.”

No discussion.  Vote taken.  Done.  It all happened in about 10 seconds.

We gave them an off-ramp.  They took it. We, for one, are very grateful that a potential train wreck for Hawaii taxpayers has been avoided.

We are also thankful for those of you who made their opinions known to our lawmakers and supported our efforts at the Foundation.

The job is not over, however.  Conference Committee meetings now begin.  We are hopeful that any conference draft will be similar to WAM’s.