Hawaii Lawmakers Propose Tax Credits for Recent Rain Victims

April 6, 2006

A proposed tax credit aimed at helping Oahu flood victims was expanded by Senate lawmakers Tuesday to cover families and businesses throughout the islands who suffered damages during the recent heavy rains.

The credit would equal 10 percent of a taxpayer’s costs for repairs, insurance and other costs up to $10,000. So if a homeowner needed $150,000 in repairs, he would be able to write off only the maximum $10,000 on his state tax forms under the credit.

Extending the credits to all state taxpayers who took a hit during the rains that pounded the islands for more than 40 days beginning in February was pushed by Gov. Linda Lingle.

Sen. Brian Taniguchi, chairman of the Ways and Means Committee, said the expense for such a program could be significant.

Another bill last year aimed at helping victims of the 2004 Manoa floods didn’t make it out of conference committee, in part because lawmakers weren’t sure what kind of damage the floods had caused, he said.

Testimony on this year’s bill originally covering the Manoa and more recent Windward Oahu floods, however, revealed that several flood victims had bills of $90,000. Others saw their houses completely pushed off their foundations and haven’t begun to add up those expenses, said Taniguchi, D-Moiliili-Manoa.

“They’re not going to get everything back. But they’ll get something back,” he said.

Including the latest flood victims in the tax credit would cost the state an extra $9.5 million, said Kurt Kawafuchi, state taxation director.

In part, because the credit would be a one time — not annual — credit, passing the bill would not likely affect the chances of other tax cuts passing out of the Legislature this year, Taniguchi said.

The natural disaster plan did not receive a welcome reception by the Tax Foundation of Hawaii.

Legislators would do better to improve upon current programs serving people who suffer losses from natural disasters, said Lowell Kalapa, president of the nonprofit.

Similar natural disaster tax relief was repealed from state codes in 1994 after a study by the Legislative Reference Bureau found that the measure was an inefficient use of the state’s tax system, he said.

“We have programs that are designed to help people recover from their disaster losses. The tax system is not an efficient means of handing out that money nor is it a way to assure that the money is being used wisely,” he said.

The bill advanced on 13 votes with two excused Tuesday and goes next before the full Senate.

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