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State Senate removes proposal to tax pensions from bill

By Mark Niesse

Associated Press

LAST UPDATED: 02:09 p.m. HST, Apr 12, 2011

State senators amended a bill Tuesday to remove a provision taxing pensions for the first time, an attempt to kill the proposal as the Legislature enters its final weeks.

Lawmakers could revive the pension tax during conference committee negotiations, but its chances of becoming law greatly diminished following the Senate's action.

Sen. Clayton Hee said taxing pensions may not survive a court challenge or raise much money.

The House had passed a bill that would have taxed pensions of individuals with federal adjusted gross income exceeding $100,000 or couples earning $200,000, raising about $17 million a year.

The amended bill prevents higher-income taxpayers from claiming state income tax deductions, generating about $40 million for the state.

The pension tax is amid hundreds of bills getting votes Tuesday as the Legislature enters the final weeks of this year's session.

The House and Senate planned to pass the measures before Thursday's deadline for them to clear their nonoriginating chambers and advance to conference committees.

Much of the debate Tuesday was expected to surround measures raising taxes to help address a projected $1.3 billion shortfall over the next two years.

Besides pensions, other tax proposals would affect online purchases, business exemptions, deductions and more.

Senators last week killed a proposal to raise the state's broadest tax, the general excise tax.

The Legislature remains hundreds of millions of dollars short of a balanced budget, even including tax increases and spending cuts.


HB1092: http://capitol.hawaii.gov/

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