UPDATED 3/1/11 5:20 p.m.

Following an all-day and into the night marathon hearing, the House Finance Committee early this morning advanced Gov. Neil Abercrombie‘s plan to tax pension income.

But it nearly tripled the suggested income thresholds in the governor’s initial proposal. The new version would bring in $95 million less per year than the governor had hoped to raise and would apply to just 0.7 percent of taxpayers.

In a 2 a.m. vote Tuesday, the committee passed an amended version of House Bill 1092, which would tax the pensions of those with a federal adjusted gross income of:

  • $100,000 for a taxpayer filing a single return or a married person filing separately. (Initially it was set at $37,500.)
  • $150,000 for a taxpayer filing as a head of household or surviving spouse. (Initially it was set at $56,250.)
  • $200,000 for taxpayers filing a joint return. (Initially it was set at $75,000.)

“We went at those high thresholds — these are adjusted gross income — so it’s a sizable amount,” Rep. Marcus Oshiro, chairman of the Finance Committee, said before the vote. “A very small segment of taxpayers will be impacted.”

Oshiro said with the higher thresholds, the proposal will impact about 4,000 tax filers, less than 1 percent of taxpayers, and generate $17 million. That’s far less than the $112.3 million the Abercrombie administration planned for in its initial proposal, which would have impacted 43,520 taxpayers.

Rep. Barbara Marumoto, one of three Republicans who voted against the bill, previously raised concerns about the initial thresholds and continued to disagree with the higher income levels.

“We’re passing a ton of taxes,” she told the committee. “I would also like to see some cuts of spending.”

Oshiro bluntly replied that most of Abercrombie’s revenue-generating measures aren’t progressing, which means cuts are impending. He cited grim outlooks for the governor’s proposals to eliminate Medicare Part B reimbursements and implement a soda tax, as well as “a liquor tax bill nowhere near what was proposed.”

“We’ve lost a number of the governor’s proposals,” he told the committee. “These measures will not address the deficit … You can speculate all you want, but as of this evening, I haven’t gotten any spreadsheet of where to cut. If you have ideas, hand it over. If any of these revenue measures fail, cuts will be deeper.”

Meanwhile, the Senate Committee on Ways and Means deferred a similar pension tax bill (SB 162) Tuesday morning1. It had included income thresholds higher than the governor’s plan, but lower than the House version:

  • $75,000 for a taxpayer filing a single return or a married person filing separately.
  • $100,000 for a taxpayer filing as a head of household or surviving spouse.
  • $125,000 for a taxpayer filing a joint return.

SB 162 would have generated $50.1 million and would’ve impact 15,395 taxpayers, or approximately 3 percent of Hawaii taxpayers.

Abercrombie’s 60-40 Healthcare Split Advances

The House Finance Committee also passed HB 1034 early Tuesday morning.

The measure would authorize the $18 million needed to increase the state’s share of employees’ health premiums from a 50-50 split to 60-40 from March 1 to June 30.

In one of his earliest proposals, Abercrombie signed off on a Dec. 23 agreement with the four labor unions covering state workers to increase the state’s share of health costs. Extending the 60-40 split to future years would cost an additional $54 million in both 2012 and 2013.

The Senate already approved an identical measure — SB 1261.

This year, the state is paying about $200 million for active employees into the Hawaii Employer-Union Health Benefits Trust Fund and another $315 million for retirees.

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