Nanakuli Bill: How do you feel about President Obama's idea to increase taxes on the wealthy?

Kurt Kawafuchi: While the Legislature has passed a similar bill for Hawai'i, we respectfully oppose such a tax increase. Many of the people impacted by this bill are small business owners that create/retain jobs in Hawai'i.

Marie: Please comment on the director of taxation's role in shaping legislation. The High Technology Credit can be traced to the efforts of former director Ray Kamikawa pushing an agenda, and now you're writing (commentaries) and testifying that it should be changed.

I thought the director's job was to enforce the tax laws, not write them?

Kawafuchi: The director's role is to provide comments including tax policy and revenue impacts of the bills.

Advertiser subscriber: My question is about the legitimacy of Act 221 investment credit claims. I recall you saying back in 2004 that as many as 20 percent of the audited claims (from 2001 and 2002) could have been fraudulent.

What does the fraud rate look like today for 2006 and 2007, and what percent of total Act 221/215 investment credit claims are audited?

Kawafuchi: Act 221 was tightened in 2004. The department audited a small percentage of the total credits claimed. However, such audits represent a large portion of the total dollars claimed. While the department has primarily focused on auditing the research credit, it has also expanded the audits to include the investment credits. Historically, about 20 to 30 percent of the total dollar amount of the credits claimed in these audit cases are disallowed.

Steve: Economies go through cycles, up and down, expanding and contracting, and we are obviously in a contraction phase, both locally and nationally. With tourism down, unemployment up and many people taking pay cuts, how can you possibly justify any tax increases instead of the contraction of benefits and the reduction of spending that was increased during the previous economic expansion?

Is it all politically motivated, so no one has to be the "bad guy" that reduced benefits and spending?

Kawafuchi: The Lingle-Aiona administration agrees with your assessment that tax increases are not justified at this time. Any tax increases at this time would hurt our economic recovery effort.

Marvin: Are you looking into expanding the sales tax to include Internet purchases coming into Hawai'i?

Kawafuchi: No, Marvin.

Don: Why has the state Department of Taxation been lax in developing its online filing services with respect to individual taxpayers? The department consistently produces press releases of steps to help businesses file necessary paperwork for tax purposes, but the only Individual Resident form available via the state's JLEF Web site is the Short Form (N-13), which less than 5 percent of taxpayers use. As a vast majority of taxpayers are also filing federal returns, it only seems common sense for the state Department of Taxation to move toward putting the N-11 online as well.

Passing this off to independent tax software companies is not acceptable. The state, in its efforts to collect more revenues, should be exploring more online options to help taxpayers, rather than punish taxpayers (the recent news of tax delinquents being published online is counterproductive).

Kawafuchi: Over the past year, we have been improving taxpayers' e-filing experience and plan to continuously improve their experience.

Patty: The Hawai'i Tax Collector's office has about $1,600 in "Unclaimed Property" (Department of Budget and Finance). This goes back to 1999 and up to 2006. Maybe you could put it towards my taxes.

Kawafuchi: By law, the monies are held in trust fund by the state until claimed. After a period of time, the monies will transfer into the state's general fund.

Patty: Actually, you may want to check. These are checks and monies that are written out to the Hawaii State Tax Collector. I know it's not a lot of money, but it's better than nothing!

Kawafuchi: Thank you, Patty. We will follow up on this.

Kyle: What do you think of developing a tax structure that supports education funding? In other cities, portions of property tax supports schools. What are your thoughts?

Kawafuchi: The property tax is administered by the counties and is used to fund counties' functions and services. The state's general funds support education to the tune of over $2 billion per year.

Donna: Can you describe what your main job is, how many staff (members) you have and what your budget is? Did you make cuts like other departments?

Kawafuchi: My main job is to administer Hawai'i taxes in a uniform and fair manner. Among my many responsibilities is to create the vision and policy for the department and work with external stakeholders. We have approximately 400 staff, our budget is about $25 million. We experienced about 15 percent in budget cuts over the upcoming biennium. I'm a CPA and an attorney. My prior experience includes trying cases for the IRS as a DOJ attorney and working at major law and accounting firm.

Nahoaloha: The administration says that taxing the higher income brackets unfairly burdens small businesses, rather than "rich people." Can you comment on what proportion of small businesses would be hurt by this tax change?

Kawafuchi: Small businesses that file their business income as personal income will have less money to pay its workers and invest in capital goods.

Hanna: I know you've put out information on delinquent taxpayers in the state, even putting their names online on your new Web site. Are you finding that method is effective?

Kawafuchi: Yes. Prior to posting the names, we had two taxpayers set up a payment plan; one file for bankruptcy; and two had their CPA contact us to work out arrangements. We have had numerous taxpayers either call or come in to pay, worried that their names would appear on the list.

Reach Kurt Kawafuchi at (Unknown address).