Bill Text: HI SB3013 | 2014 | Regular Session | Introduced

Hawaii Senate Bill 3013 (Prior Session Legislation)

Introduced

Bill Title: Taxation; Income Tax Rates; Capital Gains Tax

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2014-01-27 - Referred to WAM. [SB3013 Detail]

Download: Hawaii-2014-SB3013-Introduced.html

THE SENATE	S.B. NO.	3013
TWENTY-SEVENTH LEGISLATURE, 2014
STATE OF HAWAII

A BILL FOR AN ACT

relating to taxation.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that Hawaii's tax system has become highly regressive, with the lowest twenty per cent of Hawaii's citizens paying 13.0 per cent of their total income in state and local taxes, while the highest one per cent of citizens pay only 8.0 per cent of their total income in state and local taxes. Only three other states tax their poor more heavily than Hawaii.

The legislature also finds that the practice of taxing capital gains at a lower rate than ordinary income results in economic distortion. Taxing capital gains at a lower rate than ordinary income creates an incentive to convert ordinary income into capital gains by investing in tax shelters. Tax shelters exist solely to generate tax savings, rather than to contribute to the economy. As a result, investments in tax shelters mean capital is diverted away from other more productive investments. It should also be noted that the taxpayers best able to take advantage of tax shelters are those with very high incomes. In 2011, noted investor Warren Buffett wrote in an op-ed column that, in the previous tax year, he paid only 17.4 per cent of his total income in federal taxes, whereas his secretary and the other nineteen people who worked in his office paid an average of 36 per cent.

The legislature further finds that treating capital gains differently than ordinary income adds significant complexity to our tax code. It has been noted that a large portion of the Internal Revenue Code is devoted to defining the difference between capital gains and ordinary income. If capital gains were taxed as ordinary income, the tax code would be simplified and a great deal of unnecessary complexity could be eliminated.

The legislature believes that, although the State is currently operating at a surplus, it is still obligated to pay billions of dollars in retiree health care costs and pension benefits. As a result, additional sources of income will be needed to meet those obligations.

The purpose of this Act is to make the tax system more progressive by:

(1) Adjusting income tax brackets and rates; and

(2) Taxing capital gains as ordinary income.

SECTION 2. Act 60, Session Laws of Hawaii 2009, as amended by section 4 of Act 97, Session Laws of Hawaii 2011, is amended by amending section 6 to read as follows:

"SECTION 6. This Act shall take effect upon approval; provided that:

(1) Section 2 shall apply to taxable years beginning after December 31, 2008[;]; and

(2) Sections 1 and 3 shall apply to taxable years beginning after December 31, 2012[~~; and~~

~~(3)~~ On December 31, 2015, section 2 shall be repealed and section 235-51(a), (b), and (c), Hawaii Revised Statutes, shall be reenacted in the form in which it read on the day before the effective date of this Act]."

SECTION 3. Section 235-51, Hawaii Revised Statutes, is amended as follows:

1. By amending subsections (a), (b), and (c) to read:

"(a) There is hereby imposed on the taxable income of (1) every taxpayer who files a joint return under section 235-93; and (2) every surviving spouse a tax determined in accordance with the following table:

In the case of any taxable year beginning after December 31, 2001:

If the taxable income is: The tax shall be:

Not over $4,000 1.40% of taxable income

Over $4,000 but $56.00 plus 3.20% of

not over $8,000 excess over $4,000

Over $8,000 but $184.00 plus 5.50% of

not over $16,000 excess over $8,000

Over $16,000 but $624.00 plus 6.40% of

not over $24,000 excess over $16,000

Over $24,000 but $1,136.00 plus 6.80% of

not over $32,000 excess over $24,000

Over $32,000 but $1,680.00 plus 7.20% of

not over $40,000 excess over $32,000

Over $40,000 but $2,256.00 plus 7.60% of

not over $60,000 excess over $40,000

Over $60,000 but $3,776.00 plus 7.90% of

not over $80,000 excess over $60,000

Over $80,000 $5,356.00 plus 8.25% of

excess over $80,000.

In the case of any taxable year beginning after December 31, 2006:

If the taxable income is: The tax shall be:

Not over $4,800 1.40% of taxable income

Over $4,800 but $67.00 plus 3.20% of

not over $9,600 excess over $4,800

Over $9,600 but $221.00 plus 5.50% of

not over $19,200 excess over $9,600

Over $19,200 but $749.00 plus 6.40% of

not over $28,800 excess over $19,200

Over $28,800 but $1,363.00 plus 6.80% of

not over $38,400 excess over $28,800

Over $38,400 but $2,016.00 plus 7.20% of

not over $48,000 excess over $38,400

Over $48,000 but $2,707.00 plus 7.60% of

not over $72,000 excess over $48,000

Over $72,000 but $4,531.00 plus 7.90% of

not over $96,000 excess over $72,000

Over $96,000 $6,427.00 plus 8.25% of

excess over $96,000.

In the case of any taxable year beginning after December 31, 2008:

If the taxable income is: The tax shall be:

Not over $4,800 1.40% of taxable income

Over $4,800 but $67.00 plus 3.20% of

not over $9,600 excess over $4,800

Over $9,600 but $221.00 plus 5.50% of

not over $19,200 excess over $9,600

Over $19,200 but $749.00 plus 6.40% of

not over $28,800 excess over $19,200

Over $28,800 but $1,363.00 plus 6.80% of

not over $38,400 excess over $28,800

Over $38,400 but $2,016.00 plus 7.20% of

not over $48,000 excess over $38,400

Over $48,000 but $2,707.00 plus 7.60% of

not over $72,000 excess over $48,000

Over $72,000 but $4,531.00 plus 7.90% of

not over $96,000 excess over $72,000

Over $96,000 but $6,427.00 plus 8.25% of

not over $300,000 excess over $96,000

Over $300,000 but $23,257.00 plus 9.00% of

not over $350,000 excess over $300,000

Over $350,000 but $27,757.00 plus 10.00% of

not over $400,000 excess over $350,000

Over $400,000 $32,757.00 plus 11.00% of

excess over $400,000.

In the case of any taxable year beginning after December 31, 2013:

If the taxable income is: The tax shall be:

Not over $19,200 0.50% of taxable income

Over $19,200 but $96.00 plus 1.00% of

not over $28,800 excess over $19,200

Over $28,800 but $192.00 plus 6.80% of

not over $38,400 excess over $28,800

Over $38,400 but $845.00 plus 7.20% of

not over $48,000 excess over $38,400

Over $48,000 but $1,536.00 plus 7.60% of

not over $72,000 excess over $48,000

Over $72,000 but $3,360.00 plus 7.90% of

not over $96,000 excess over $72,000

Over $96,000 but $5,256.00 plus 8.25% of

not over $150,000 excess over $96,000

Over $150,000 $9,711.00 plus 11.00% of

excess over $150,000.

(b) There is hereby imposed on the taxable income of every head of a household a tax determined in accordance with the following table:

In the case of any taxable year beginning after December 31, 2001:

If the taxable income is: The tax shall be:

Not over $3,000 1.40% of taxable income

Over $3,000 but $42.00 plus 3.20% of

not over $6,000 excess over $3,000

Over $6,000 but $138.00 plus 5.50% of

not over $12,000 excess over $6,000

Over $12,000 but $468.00 plus 6.40% of

not over $18,000 excess over $12,000

Over $18,000 but $852.00 plus 6.80% of

not over $24,000 excess over $18,000

Over $24,000 but $1,260.00 plus 7.20% of

not over $30,000 excess over $24,000

Over $30,000 but $1,692.00 plus 7.60% of

not over $45,000 excess over $30,000

Over $45,000 but $2,832.00 plus 7.90% of

not over $60,000 excess over $45,000

Over $60,000 $4,017.00 plus 8.25% of

excess over $60,000.

In the case of any taxable year beginning after December 31, 2006:

If the taxable income is: The tax shall be:

Not over $3,600 1.40% of taxable income

Over $3,600 but $50.00 plus 3.20% of

not over $7,200 excess over $3,600

Over $7,200 but $166.00 plus 5.50% of

not over $14,400 excess over $7,200

Over $14,400 but $562.00 plus 6.40% of

not over $21,600 excess over $14,400

Over $21,600 but $1,022.00 plus 6.80% of

not over $28,800 excess over $21,600

Over $28,800 but $1,512.00 plus 7.20% of

not over $36,000 excess over $28,800

Over $36,000 but $2,030.00 plus 7.60% of

not over $54,000 excess over $36,000

Over $54,000 but $3,398.00 plus 7.90% of

not over $72,000 excess over $54,000

Over $72,000 $4,820.00 plus 8.25% of

excess over $72,000.

In the case of any taxable year beginning after December 31, 2008:

If the taxable income is: The tax shall be:

Not over $3,600 1.40% of taxable income

Over $3,600 but $50.00 plus 3.20% of

not over $7,200 excess over $3,600

Over $7,200 but $166.00 plus 5.50% of

not over $14,400 excess over $7,200

Over $14,400 but $562.00 plus 6.40% of

not over $21,600 excess over $14,400

Over $21,600 but $1,022.00 plus 6.80% of

not over $28,800 excess over $21,600

Over $28,800 but $1,512.00 plus 7.20% of

not over $36,000 excess over $28,800

Over $36,000 but $2,030.00 plus 7.60% of

not over $54,000 excess over $36,000

Over $54,000 but $3,398.00 plus 7.90% of

not over $72,000 excess over $54,000

Over $72,000 but $4,820.00 plus 8.25% of

not over $225,000 excess over $72,000

Over $225,000 but $17,443.00 plus 9.00% of

not over $262,500 excess over $225,000

Over $262,500 but $20,818.00 plus 10.00% of

not over $300,000 excess over $262,500

Over $300,000 $24,568.00 plus 11.00% of

excess over $300,000.

In the case of any taxable year beginning after December 31, 2013:

If the taxable income is: The tax shall be:

Not over $14,400 0.50% of taxable income

Over $14,400 but $72.00 plus 1.00% of

not over $21,600 excess over $14,400

Over $21,600 but $144.00 plus 6.80% of

not over $28,800 excess over $21,600

Over $28,800 but $634.00 plus 7.20% of

not over $36,000 excess over $28,800

Over $36,000 but $1,152.00 plus 7.60% of

not over $54,000 excess over $36,000

Over $54,000 but $2,520.00 plus 7.90% of

not over $72,000 excess over $54,000

Over $72,000 but $3,942.00 plus 8.25% of

not over $112,500 excess over $72,000

Over $112,500 $7,283.00 plus 11.00% of

excess over $112,500.

(c) There is hereby imposed on the taxable income of (1) every unmarried individual (other than a surviving spouse, or the head of a household) and (2) on the taxable income of every married individual who does not make a single return jointly with the individual's spouse under section 235-93 a tax determined in accordance with the following table:

In the case of any taxable year beginning after December 31, 2001:

If the taxable income is: The tax shall be:

Not over $2,000 1.40% of taxable income

Over $2,000 but $28.00 plus 3.20% of

not over $4,000 excess over $2,000

Over $4,000 but $92.00 plus 5.50% of

not over $8,000 excess over $4,000

Over $8,000 but $312.00 plus 6.40% of

not over $12,000 excess over $8,000

Over $12,000 but $568.00 plus 6.80% of

not over $16,000 excess over $12,000

Over $16,000 but $840.00 plus 7.20% of

not over $20,000 excess over $16,000

Over $20,000 but $1,128.00 plus 7.60% of

not over $30,000 excess over $20,000

Over $30,000 but $1,888.00 plus 7.90% of

not over $40,000 excess over $30,000

Over $40,000 $2,678.00 plus 8.25% of

excess over $40,000.

In the case of any taxable year beginning after December 31, 2006:

If the taxable income is: The tax shall be:

Not over $2,400 1.40% of taxable income

Over $2,400 but $34.00 plus 3.20% of

not over $4,800 excess over $2,400

Over $4,800 but $110.00 plus 5.50% of

not over $9,600 excess over $4,800

Over $9,600 but $374.00 plus 6.40% of

not over $14,400 excess over $9,600

Over $14,400 but $682.00 plus 6.80% of

not over $19,200 excess over $14,400

Over $19,200 but $1,008.00 plus 7.20% of

not over $24,000 excess over $19,200

Over $24,000 but $1,354.00 plus 7.60% of

not over $36,000 excess over $24,000

Over $36,000 but $2,266.00 plus 7.90% of

not over $48,000 excess over $36,000

Over $48,000 $3,214.00 plus 8.25% of

excess over $48,000.

In the case of any taxable year beginning after December 31, 2008:

If the taxable income is: The tax shall be:

Not over $2,400 1.40% of taxable income

Over $2,400 but $34.00 plus 3.20% of

not over $4,800 excess over $2,400

Over $4,800 but $110.00 plus 5.50% of

not over $9,600 excess over $4,800

Over $9,600 but $374.00 plus 6.40% of

not over $14,400 excess over $9,600

Over $14,400 but $682.00 plus 6.80% of

not over $19,200 excess over $14,400

Over $19,200 but $1,008.00 plus 7.20% of

not over $24,000 excess over $19,200

Over $24,000 but $1,354.00 plus 7.60% of

not over $36,000 excess over $24,000

Over $36,000 but $2,266.00 plus 7.90% of

not over $48,000 excess over $36,000

Over $48,000 but $3,214.00 plus 8.25% of

not over $150,000 excess over $48,000

Over $150,000 but $11,629.00 plus 9.00% of

not over $175,000 excess over $150,000

Over $175,000 but $13,879.00 plus 10.00% of

not over $200,000 excess over $175,000

Over $200,000 $16,379.00 plus 11.00% of

excess over $200,000.

In the case of any taxable year beginning after December 31, 2013:

If the taxable income is: The tax shall be:

Not over $9,600 0.50% of taxable income

Over $9,600 but $48.00 plus 1.00% of

not over $14,400 excess over $9,600

Over $14,400 but $96.00 plus 6.80% of

not over $19,200 excess over $14,400

Over $19,200 but $422.00 plus 7.20% of

not over $24,000 excess over $19,200

Over $24,000 but $768.00 plus 7.60% of

not over $36,000 excess over $24,000

Over $36,000 but $1,680.00 plus 7.90% of

not over $48,000 excess over $36,000

Over $48,000 but $2,628.00 plus 8.25% of

not over $75,000 excess over $48,000

Over $75,000 $4,856.00 plus 11.00% of

excess over $75,000."

2. Amending subsection (f) to read:

"(f) If a taxpayer has a net capital gain for any taxable year to which this subsection applies, then the tax imposed by this section shall not exceed the sum of:

(1) The tax computed at the rates and in the same manner as if this subsection had not been enacted on the greater of:

(A) The taxable income reduced by the amount of net capital gain, or

(B) The amount of taxable income taxed at a rate below 7.25 per cent, plus

(2) A tax of 7.25 per cent of the amount of taxable income in excess of the amount determined under paragraph (1)[.];

provided that after December 31, 2013, all capital gains shall be taxed according to the tax filing status and tax bracket under subsections (a) through (d) that applies to the taxpayer.

This subsection shall apply to individuals, estates, and trusts for taxable years beginning after December 31, 1986."

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2013.

INTRODUCED BY:	_____________________________

Report Title:

Taxation; Income Tax Rates; Capital Gains Tax

Description:

Changes income tax brackets and rates after 12/31/2013. Provides for taxation of capital gains as ordinary income.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.