POSTED: 1:30 a.m. HST, Jan 28, 2011
The bill is modestly titled "Tax Improvement," but chances are that a lot of retired folks won't think paying state tax on their pensions is making anything better.
Hawaii, according to the independent Hawaii Tax Foundation, is one of just 10 states that does not tax pensions.
Lowell Kalapa, Tax Foundation president, says the Hawaii exemption started when Hawaii was still a territory and was used to help public employees who were paid less than those in the private sector.
Now everyone's pension is exempt from state income taxes, which on the average run around 10 percent.
Now, according to House Bill 1092, only single taxpayers with incomes under $37,500, or heads of households with incomes under $56,250, or those filing joint returns of under $75,000 would get the total exemption.
The Legislature's most experienced veteran in the tax wars is Maui Democratic Rep. Joe Souki. He was on the front line when former Gov. Ben Cayetano's economy recovery task force recommended a dramatic overhaul of state taxes.
The plan was to shift the taxes to folks who don't live here. The plan would have raised the general excise tax (GET) and lowered the income tax, and made other adjustments so that visitors paid more taxes and local payers paid less. But the idea of raising the GET did not cause a rise in political courage.
Shortly after that, Souki lost his position as House speaker and the new speaker, Rep. Calvin Say, has been guided by the economic manifesto of "Thou Shalt Not Raise the GET."
But now, as Abercrombie's bill notes, times have changed. Saying that the bill will "institute improvement and equity," the proposal will go after individuals and business "that have enjoyed tax benefits that are unwarranted today in light of the state's current budget crisis."
The bill includes other changes so that by 2015, it will raise nearly $1 billion and is a big part of Abercrombie's budget-balancing plan.
It also could turn out to be the biggest anti-incumbent bill of the year: How you voted on HB 1092 could be directly related to how good a chance you will have in the 2012 election.
Obviously folks getting ready to retire and those already retired are most worried about their pensions.
Unfortunately for Abercrombie and the Legislature, the huge baby boom generation is getting ready to retire and these people are not sanguine about losing 10 percent of their pension to state taxes.
Barbara Stanton, AARP state director, agrees, adding that several years ago, an elimination of the pension exemption mistakenly was put in a state bill.
"This caused a firestorm of calls and generated more calls on any single issue in one day to our state office since we opened almost a decade ago," Stanton recalls.
This is the sort of reaction that could make a complete GET overhaul look like the wise way out of a $841 million deficit.