House Democrats approve tax relief for middle-class Hawaii taxpayers

House Democrats approve tax relief for middle-class Hawaii taxpayers  (2007) 
by Neil Abercrombie

from office of the representative, released November 9, 2007

Washington, D.C. - Democrats in the U.S. House today passed a temporary tax relief measure that extends some tax credits that are set to expire at the end of this year, including a child tax credit that’s popular among Hawaii taxpayers and deductions for college tuition and teachers’ out-of-pocket expenses.

On a vote of 216-193 with every Republican voting against it, the House approved the “Temporary Tax Relief Act of 2007” which extends the credits and also prevents more and more middle-income taxpayers in Hawaii from having to pay the alternative minimum tax (AMT).

“This legislation is about fairness and fiscal responsibility,” said Representative Neil Abercrombie, who supported the bill. “It’s fair because the tax credits addressed in this legislation will benefit Hawaii’s middle-class taxpayers and stop the growing number of local families having to pay the AMT since it’s creation in 1969.”

One of the extensions affects the child tax credit which was claimed on 104,510 tax returns in Hawaii and totaled more than $133 million dollars in 2005. Under the legislation, nearly 13,000 additional children in Hawaii will qualify, and more than 38,000 will be eligible for a larger credit.

The AMT was created in 1969 to ensure that the nation’s wealthiest households paid at least some income taxes. But the law didn’t ensure that the AMT was indexed for inflation, forcing a growing number of American taxpayers to be covered by the tax.

In Hawaii, the AMT covered several hundred taxpayers in 1969, but that number has grown over the years so that by 2005 the number of tax returns that were affected by the AMT was 10,923 and totaled more than $42 million in taxes. Without some kind of relief, that total would assuredly grow.

In addition to preventing middle-income taxpayers from paying the AMT next year, the legislation:

  • Allows homeowners who do not itemize deductions on their tax returns to deduct up to $700 ($350 for single taxpayers) of property taxes paid, in addition to the standard deduction.
  • Expands eligibility for the $1,000 child tax credit and the earned income tax credit.
  • Extends the deduction for college tuition.
  • Expands tax rebates to working parents too poor to pay income tax.
  • Extends for one year the special rules that allow members of the armed forces to include combat pay as earned income to qualify for earned income tax credit.
  • Extends the deduction for state and local sales taxes.
  • Extends deductions of up to $250 per claim for teachers who pay for school supplies out of their pockets.
  • Extends for one year special rules that permit military reservists serving on active duty to make penalty-free withdrawals from retirement plans.
  • Extends the research and development credit
  • Extend for one year the provision allowing businesses to claim an enhanced deduction for the contribution of food inventory
  • Extends the provision allowing C corporations to claim an enhanced deduction for contributions of book inventory to public schools. According to the IRS, in 2006 there were 15,105 C corporation or other corporate tax returns in Hawaii.
  • Extends a provision allowing businesses to deduct the value of computer equipment and software donated to elementary, secondary and post secondary schools.
  • Reduces the corporate tax rate from 35% to 30.5%, removing an incentive for businesses to move jobs overseas.

“This bill is responsible because it’s revenue neutral, completely within the ‘Pay As You Go’ rules adopted by this Congress.” Abercrombie said. “The tax relief is provided by closing tax loopholes and eliminating narrowly-targeted tax breaks for corporations.”

This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).