by Lowell L. Kalapa, Tax Foundation of Hawaii

In a year when there is not a lot of money for lawmakers to throw at their favorite cause or community project, the focus has turned to having lawmakers look like they are concerned about this or that cause without spending a single tax dollar.

How, you might say, can lawmakers look like they are concerned when there is no money to spend? And if you haven’t noticed or heard someone bemoan the loss of programs and services in the last three years, you are certainly not paying attention. So how can lawmakers look concerned without spending a dime? Why they are asking you, the taxpayer, to cough up a voluntary dollar or two by sending a part of your state tax refund into a special fund designated for that cause.

The mechanism can already be found on your state income tax return after you have figured out what you owe and what you already had withheld from your paycheck. It’s called a state tax check-off. The ones already on your return allow you to designate a portion of your state tax refund for the Hawaii Schools Repairs and Maintenance Fund, the Hawaii Public Libraries Fund, or the Domestic Violence/Child Abuse and Neglect Funds. In addition to those programs, there is also a check-off where you can designate monies for the Hawaii Campaign Election Fund. This latter check-off is similar to the one found on your federal return where you can designate $3 of your federal refund for the Presidential Election Campaign Fund, both of which have been around for decades.

What is interesting to note is that when these check-offs were adopted, they were adopted with high hopes that good-hearted taxpayers would voluntarily put a part of their tax refund toward these worthy causes. However, as recent reports note, the amount to be designated for these purposes has slowly declined. For example, the Schools Repairs check-off garnered $66,406 during fiscal year 2011 which was down from the $72,200 it picked up in the previous fiscal year 2010. Designated check-offs for Domestic Violence and Child Abuse dropped from $134,445 in fiscal 2010 to $129,045 for 2011.

No doubt there may be enthusiasm in the first years after the check-off is adopted and placed on the income tax form, but as that check-off becomes just another line on the income tax form, those who have little or no interest in the program or issue just whiz by those lines with the focus on completing their tax return and getting it in the mail.

But lawmakers see the check-off mechanism as a means by which they can demonstrate to their constituents that there are concerned about certain issues and that certainly has become the showcase for this session. A search of the legislative hopper turned up a proposal to adopt a check-off for spaying and neutering animals to reduce the number of feral animals through spaying and neutering and educate the public regarding the importance of spaying and neutering pets to prevent homeless animal overpopulation.

Another proposal would adopt a check-off for the Hawaii public schools science and technology programs while yet another proposal would adopt a check-off for the early learning trust fund. Another would allow you to designate a portion of your state tax refund for the state foundation for culture and the arts.

A survey of states that have check-off mechanisms on their income tax forms conducted by the Federation of Tax Administrators found that due to the administrative costs associated with the check-off programs, states that currently have the check-offs are looking to adopt expiration clauses and other means to remove the less productive check-offs. Lawmakers seem to view such check-offs as absolution of their responsibility to deal with such problems by turning the response directly over to the taxpayer. However, in the long run, the cost of administering the check-off merely siphons resources that should otherwise be used for providing needed public services.

Inasmuch as one of the major jobs taxpayers elect legislators to office to do is to weigh the priorities for what limited tax dollars there are - so then the check-off mechanism negates that purpose for having lawmakers. If lawmakers believe that earmarking funds through a check-off system is appropriate, then they might consider placing all programs on the state income tax form for designation and consider repealing the legislative body, as there will be no reason for the legislature to exist because decisions will have been made by the income taxpayer.

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