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The Honolulu Advertiser
Posted on: Thursday, April 23, 2009

Legislators need pay cuts, not retirees

By Lee Cataluna
Advertiser Columnist

Senate Bill 971 sounds copacetic with the title "Relating to conformity of the Hawai'i income tax law to the Internal Revenue Code." Always a good thing to conform to the IRS, right?

But tucked in that bill is an attempt to tax retirees' pensions. This, from the same folks who seem to feel no guilt taking sizable pay raises for themselves while programs are being cut and there's talk of furloughs to balance the budget.

The Ways and Means Committee tacked on a provision to the statutes that would tax government and private employer-funded pension income over $50,000. Before that happened, the state tax director supported the bill. After, he was like, "Wait a minute ... "

Not a whole lot of people get pensions that size, but the ones who do, or who will upon retiring, worked a long time to get them. They planned their lives around that and now Hawai'i may change the rules.

These days, pensions are being replaced by IRAs or 401(k) accounts, which are taxable as income in Hawai'i — one of 10 states that does not tax pensions.

State Tax Director Kurt Kawafuchi first submitted testimony in support of the bill, but after the part about taxing pensions was slipped in, Kawafuchi submitted testimony saying his department has "strong concerns" regarding that idea.

"This measure could be the slippery slope that leads to all-out taxation of pensioners who worked for lower salary in hopes of a tax-free retirement," Kawafuchi said in his testimony.

"Any amendments to the taxation of retirement income must be removed from this bill."

The Department of Taxation estimates the net revenue impact of the new tax would be around $6 million — more nickel-and-dime thinking applied to nine-figure problems.

Of course they're scrambling at the Capitol right now, throwing up all kinds of ideas to fill the budget hole and making tough decisions akin to robbing Peter to pay Paul (and them-selves). They have an exceptionally hard job this year, but every one of them promised in their campaigns that they were up to it.

Legislators have no business touching anybody else's income until they start with their own. Hack up those raises, and then maybe they won't look like such thieves going after retirees' income. At the very least, if they're going to go after people's pensions, they need to be straight up about it and not tuck it into a large, rangy bill with a benign-sounding title.

Lee Cataluna's column runs Tuesdays, Fridays and Sundays. Reach her at 535-8172 or lcataluna@honoluluadvertiser.com.