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Lessons to be Learned From Bad Drafting

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By Lowell L. Kalapa

With the legislative session right around the corner and an armful of new legislators, a red warning flag needs to be raised about the work that these lawmakers are about to undertake.
While no idea should be passed up, it is the debate that is important in deciding whether or not that proposal deserves to become a part of the laws which govern our lives. Nifty as an idea may sound, lawmakers need to look at all sides of an issue before judging what is best for the majority of the community. Too often lawmakers feel the political heat and try to “take care” of a selected constituency but in the long run it turns out that the rest of the community has to “pay” for taking care of that constituent.
Such is the case in adopting tax incentives for various types of activities, be it alternate energy devices or high technology businesses, the tax incentives are not “free” money. It is money foregone by the state and must be made up by other taxpayers who are not so favored.
Some may ask what’s wrong with encouraging new economic activities especially when they create new jobs. The problem is that if lawmakers don’t reduce the demand for tax dollars to pay for programs, the money must come from other sources. As a result, favoring only some activities comes at the expense of all others. And when it comes at the expense of not being able to reduce the tax burden for all taxpayers, lawmakers actually make the state a worse place to do business, to live and to work.
Another challenge facing lawmakers and their staff is getting the legislation to read correctly so it does what it was intended to do. For example, last session lawmakers approved a measure to relieve taxpayers serving in the national guard and armed services reserves from having to pay state income taxes on the money they earn attending the 48 drills and 15-day annual duty. This came after being told that Hawaii already exempts the pay earned while serving in a combat zone, a proposal that had been made by the administration.
Wanting to do “something” for personnel in uniform, the proposal sailed through the session with the hint that the current $1,750 income exclusion would be increased. After being sent to the third house of the legislature, fondly known as the conference committee, the bill emerged from the dark halls with a five-year phase-in of income exclusion tied to a pay grade. The amount to be excluded would be what was paid for the weekend drills and annual duty after eight years of service. The first year of the phase-in delineates that the amount to be excluded is that received by a person who is in the E-1 pay grade and has eight years of service. Anyone who is familiar with the service knows that if one were still in an E-1 pay grade after eight years, they probably should have been kicked out of the service. In fact, the pay schedules used by the guard and reserves don’t show an amount for an E-1 beyond four years of service. Not only was the measure passed by the legislature, but it was signed into law by the governor. This oversight should never have happened had someone done some research or at least made an inquiry.
Another blooper resides in the tax exemption for the fees under the newly implemented “bottle bill.” When the measure first passed two years ago, an exemption from the general excise tax was added at the last minute. The problem was that the term for the fee used in the exemption didn’t match any of the terms used for the fee in other parts of the bill. Since there are two fees imposed, one paid by the distributor which began two years ago at a rate of a half-cent per container and the now infamous nickel per container that is paid at the cash register, no one was quite sure what was intended. The tax department issued an information release acknowledging the exemption and provided an example which focused on the half-cent advance disposal fee perhaps because it was already being imposed. The information release made no mention of the nickel deposit fee.
When the legislature “fixed” the bottle bill this year, they added an exemption from the net income tax for the “fee” utilizing the term they used for the general excise exemption which again did not mirror any of the terminology used elsewhere in the law for either fee. Again, no one is sure which fee is meant but for now the tax department will exempt both the half-cent as well as the nickel. But if the 2005 legislation doesn’t clarify which fee is exempt, it likely that the department will exempt only one of the fees.
Again, it is important that lawmakers make sure that what they are approving is what they intended by doing the necessary research and exercising come care in drafting that new law.

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