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Faulty Legislation Falls Short of Doing the Job

posted in: Weekly Commentary 0
By Lowell L. Kalapa

The Governor may have a difficult time rejecting some of the recently approved legislation because of the emotional appeal of the issue, yet because they are either faulty or address so few taxpayers, they should be vetoed.
One of these bills appeals to the emotional support currently being given to men and women in uniform. Under current law, persons serving in the national guard or who are armed forces reservists may exclude the first $1,750 of the pay they receive for their services in either the national guard or reserves from state income tax.
Prior to 1966, military pay was exempt from state income tax. The legislature by Act 155, SLH 1965, repealed this exemption, thereby conforming the state law with the federal law which exempts only “combat pay.” Later, the 1970 legislature adopted a $500 exclusion of income for reservists which was subsequently increased to $1,750 by Act 340, SLH 1990.
The history of this provision does not provide any specific rationale for its adoption. In fact, as the measure that eventually established the $500 exclusion made its way through the legislative process, the provision was diluted from one that initially would have exempted compensation for any member of the armed forces who was absent from the state for more than 300 days. In the end, the provision was limited to the first $500 of reservist and national guard compensation.
This year’s proposal started out as an attempt to raise the amount excluded from the current $1,750 to $5,000. The measure was deferred to the final days of the 2004 session when it became obvious that its success would be pinned on the price tag or the cost of the change in the amount of the exclusion.
As the measure emerged from the joint house-senate conference committee, lawmakers seemed to have found a new approach to provide an income tax benefit for this group of taxpayers. The amount excluded is phased-in over five years and would be the amount that is paid to national guardsmen and reservists for the weekend drills in which they are required to participate and the 15-day annual duty that is part of their service.
However, the kicker is that the phase-in of the exclusion is tied to levels or “grades” of pay with the first year of the phased-in exclusion equal to what an “E-1” person would receive . . . after eight years of service. The problem with that, as a number of national guard personnel pointed out, is that there is probably no one who is still at the “E-1” rank after four years of service let alone after eight years of service. In fact, the national guard pay schedule doesn’t have an amount for an “E-1” rank after four years. The same can be said of the next two rankings of “E-2” and “E-3” after eight years of service.
The result is that unless the application is forced to conform to what the law states, there will be no exclusion of income for national guard and reservist personnel. While it may be difficult to veto this measure in light of the empathy for those in uniform, this measure should be rejected as it is a disingenuous effort on the part of lawmakers.
The other measure which deserves the gubernatorial veto is a measure that would allow a deduction for the maintenance of “exceptional” trees that have been so designated by the county council. Not only does this addition to the law digress from the state’s effort to maintain conformity between the state and federal laws, but it creates a law that will be an administrative nightmare. The proposal would allow up to $3,000 in expenses to be deductible to maintain an exceptional tree, provided the deduction is claimed only once every three years and the deductible maintenance costs must be deemed necessary by a certified arborist.
Who will monitor the requirements of this deduction or will it be subject to abuse because the department doesn’t have the resources to check to see if the deduction was taken only once every three years? Or will they require that the taxpayer submit a certification that the maintenance work was necessary and maintain a list that the person so certifying was indeed a certified arborist? Or for that matter if a taxpayer has two “exceptional trees” in his or her yard, will the tax auditor know that the deduction claimed was for the tree in the front yard this year and for the one in the back yard next year?
This nonsensical proposal is an example of the bad legislation that merely panders to constituencies at the cost of all other taxpayers who aren’t eligible for the tax break. It is not free. It means reduced tax collections and increased administrative costs. And that cost comes out of you, the taxpayer.

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