The state House Finance Committee advanced a bill Tuesday that would give teachers a state tax credit for their out-of-pocket classroom expenses.
The committee unanimously approved Senate Bill 573, but the amount of the credit will need to be negotiated in conference committee between House and Senate lawmakers.
Previous versions have included credits of up to $250 or up to $500 per year, but both the House Education and Finance committees chose to leave the amount of the proposed credit unspecified.
At the $250 level, the credit would cost the state about $3.5 million a year in lost tax revenue, the state Department of Taxation estimated.
State Tax Director Fred Pablo testified that a $250 federal tax deduction already exists for elementary and secondary school teachers. He said nothing would "prevent a taxpayer from claiming both a deduction and the credit for the same expenses," resulting in "duplicate tax benefits."
Nationally, teachers on average spent $356 of their own money on school supplies and materials during the 2009-10 school year, according to the National School Supply & Equipment Association, a trade association for educational product companies.
SB 753 defines qualifying purchases as books, supplies other than athletic supplies, computer equipment such as software, and supplementary materials used in the classroom. The credit could be taken by teachers at public, charter and private schools.
Because the proposed credit would offset income taxes a teacher owes, the Tax Foundation of Hawaii said it would amount to a pay raise for teachers and a tax hike for the rest of the taxpayers. The organization said the tax system shouldn’t be used to compensate teachers.
Meanwhile, the teachers union, which supports the bill, has argued that teachers are forced to spend their own money because of budget cuts.
The Hawaii State Teachers Association previously testified that a survey of members found that half of teachers who responded had annual out-of-pocket expenses of between $250 and $500, and some as high as $1,000. The union represents about 13,500 public and charter school teachers.
Lynn Hammonds, executive director of the Hawaii Teacher Standards Board, testified that "Hawaii teachers do not hesitate to spend out-of-pocket to ensure their students have supplies, even while contending with their own challenging financial constraints of pay cuts and rising health insurance costs." She encouraged lawmakers to "provide tax relief for these selfless individuals."
The bill appeared to have more supporting testimony from teachers before the announcement late last month that a tentative labor contract with the state would boost teachers’ salaries through a combination of across-the-board increases and pay grade step-ups in alternating years.
If approved, the credit would take effect beginning with the 2013 tax year, with forms to be filed in April 2014.
Pablo said it will be challenging for the Tax Department to develop the required forms and instructions in time "due to technological and staffing constraints."
