Posted on: Wednesday, May 14, 2003

Tax credits to cost state $83 million

By Gordon Y.K. Pang
Advertiser Capitol Bureau

Tax credits will mean an estimated $83 million less in state revenue this fiscal year than originally envisioned by Department of Taxation officials, who gave the Council on Revenues a rundown of the figures at a workshop yesterday.

The council, which makes the revenue forecasts upon which the state budget is based, is expected to revise its growth projection for the year from 4.3 percent to less than 1 percent when it meets tomorrow and Friday.

That is expected to cost the state more than $100 million for the fiscal year that ends June 30.

Gov. Linda Lingle said Monday that in addition to budget cuts, she intends to defer payments on bills normally paid at the end of the fiscal year until July 1 or later.

The $83 million shortfall is the result of businesses and individuals taking advantage of about a dozen different tax credits that, in total, will cost the state $180 million in tax collections this fiscal year.

Tax officials, who are reluctant to give too many details before this week's meeting, said the largest deviation from their original predictions appears to be in the residential remodeling tax. Originally thought to cost $40 million, tax officials said they now predict $60 million in credits will be applied this year.

Numbers provided to council members indicate that Act 221 high-tech tax credits will cost the state about $48.4 million, roughly $1.4 million than originally forecast.

The Tax Department put the total shortfall at about $130 million, noting that about $36 million is the result of Act 190. That law reduces the percentages used to determine the required annual payment on estimated income taxes from 90 percent to 60 percent of the tax due. The $36 million difference would then show up in next year's budget.