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Disaster Strikes All, Not Just A Few

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By Lowell L. Kalapa

The more than a month and a half of severe rains underscores how vulnerable Hawaii is to natural disasters be it from the recent heavy rainfall causing floods to hurricanes, droughts, tsunami’s and/or volcanic activity.

While we are all saddened by the plight of the victims of these disasters, there are numerous ways to help the victims recover with both public and private resources. In some cases, private insurance will compensate victims while help can come in the form federal or state grants or loans. And for what is not reimbursed as a result of the losses incurred by a victim of a natural disaster, the federal and state income tax laws allow the taxpayer to take a deduction against income for that year for those unreimbursed casualty losses.

Apparently state lawmakers have no idea of the help that is available to victims of disasters as they are in the midst of approving legislation that would grant certain victims of natural disasters a tax credit. Originally introduced in the 2005 session by the lawmakers who represent Manoa, the amount of the credit would have been equal to the expenses incurred by the taxpayer for repairs, insurance, rental or other costs related to the damage caused to the taxpayer’s real or personal property by the heavy rain and floods that occurred in late October of 2004 in Manoa provided the amount claimed did not exceed $2,000.

However, observers noted that the proposal would set a bad precedent, as there have been countless natural disasters to strike different neighborhoods throughout the islands.

The measure failed to gain approval in the 2005 session of the legislature so it was introduced again this year. This time around the credit was to be equal to 10% of the taxpayer’s losses or $500, whichever is less, but the credit could not exceed $2,000 per taxpayer. After “compelling” testimony presented on the bill, it was amended to increase the amount of the credit so that taxpayers could claim 10% of their losses up to $10,000.

Just about the time the measure was being moved from the Senate to the House, the latest bout of rainstorms was beginning. So when the Ways and Means Committee heard a similar measure the other day, the measure included the flood-damaged areas of windward Oahu as eligible for the tax credit. No sooner did the chair open for questions, the senator from Salt Lake/Moanalua asked whether or not the floods that occurred there could be included as eligible for the tax credit and that request was followed by a request from the senator from Kauai.

The chair announced that the bill would be applicable to all rain and flood damage done statewide. Members of the committee nodded with pleasure and satisfaction to take care of the poor flood victims. But then one senator asked what the term “rental” means when the bill provides that the credit will be “ten percent of the losses incurred by the taxpayer for repairs, insurance, rental, or other expenses or costs related to damage caused to the taxpayer’s real or personal property.”

The senator wanted to know if that meant that the taxpayer had to rent shelter because his or her house had been damaged or did it mean that a landlord had to forego rent because the tenant was flooded out of the rental? A similar question was raised about insurance as one senator noted, “how can there be a loss incurred for insurance as a result of damage to property.” Hopefully the insurance company will pay because of the loss and not the other way around.

That discussion underscores the fact of the matter that this measure is nothing but political pandering to constituents. Not a lot of thought has been given to the idea of handing out tax credits to compensate victims of these floods for unreimbursed losses. The bill itself establishes the tax credit as a session law and is not even located within the income tax law so that it can take advantage of definitions contained in the income tax law.

Nor has any thought been given to what sort of precedent this sets. If lawmakers approve tax credits for losses this year, what will they do if a tsunami strikes one of the islands next year or Kilauea decides to erupt and cover another town like it covered Kapoho more than 40 years ago?

While we all sympathize with the plight of the flood victims, there are mechanisms in the law to deal with providing relief to disaster victims, no matter what kind of disaster it is. Established after the Territory/State was struck with three major disasters in 1959 and 1960, Chapter 127 is the basis for all natural disaster relief undertaken by state government. It allows state officials to ascertain the kind of relief and the amount of relief to be granted. It takes the entire needs of the state into account and puts the help where it is most needed.

Instead of merely handing out tax credits to make it look like lawmakers are doing something, the state needs to take a proactive approach to disaster relief.

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