The state House Finance Committee is exploring a hybrid tax on pensions that would exclude a certain amount of pension income from taxation but impose the tax at federal adjusted gross income thresholds.
Proposal A would base the tax on higher federal adjusted gross income thresholds than the Abercrombie administration prefers.
*$100,000 for single or married filing separately;
*$150,000 for head of household or surviving spouse;
*$200,000 for joint returns
Proposal B would exclude pension income from taxation up to these income thresholds:
*$75,000 for individuals
*$112,500 for heads of households
*$150,000 for joint returns
State Rep. Marcus Oshiro, (D-Wahiawa), the committee’s chairman, prepared the two options and is working with the Abercrombie administration on a potential hybrid of the ideas.
Fred Pablo, the state tax director, said he is open to a hybrid. But both Pablo and Dean Hirata, the deputy director of the state Department of Budget and Finance, told lawmakers they prefer the administration’s original position with these federal adjusted gross income thresholds:
*$37,500 for single or married filing separately;
*$56,250 for head of household or surviving spouse;
*$75,000 for joint returns
From Hirata’s written testimony, read on behalf of budget director Kalbert Young:
The Department of Budget and Finance supports the intent of these proposals but prefers the original Administration bill which has lower exclusion thresholds on pension incomes, and other provisions which are important components of the Abercrombie Administration’s approach to addressing the general fund budget shortfall.
The difference in revenue generation between the three proposals is significant. According to Pablo, the administration’s proposal would bring in $112.3 million a year, while Proposal A would generate $17.1 million and Proposal B would bring in $9.9 million. There was no immediate estimate on revenue generation for the hybrid option.
Earlier this month, the state Senate Ways and Means Committee heard a Senate alternative that included higher federal adjusted gross income thresholds than the governor proposed. The committee took no action on the bill.