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The Associated Press July 2, 2010, 10:48AM ET

Hawaii gov vetoes bills, citing economy, charity

Hawaii Gov. Linda Lingle vetoed two tax bills on Thursday, saying the legislation would have had a damaging effect on investment and charitable donations.

The first bill would have cut to May the last date by which people would have to had made investments to claim a high-technology tax credit. The deadline under the current law is Dec. 31.

Lingle said Thursday the legislation would raise doubts about the reliability of state policy and undermine its efforts to expand the economy and create new jobs.

She noted the bill would retroactively eliminate a tax credit for investments made in years past. This would make people think the state is unable to keep its word, she said.

"When government policies change with little notice or rationale, investors and firms understandably decide to pull back and invest their capital elsewhere," Lingle said in a letter to the Legislature explaining why she vetoed the bill. "This is poor public policy and will have long-term adverse implications for the state's ability to attract or retain new jobs and new investment."

The second bill she vetoed would have temporarily placed a cap on itemized deductions claimed on state income tax returns until 2016.

Lingle said this bill would have discouraged charitable donations.

Capping the deduction would also limit people's ability to deduct for home mortgage interest, job-related expenses and certain tax payments, she said. Nonprofit and charitable organizations that depend on contributions told her they were concerned the bill would hurt their ability to raise funds, she said.

"It is a de facto tax increase that will adversely hurt certain individuals and businesses at a time when we should be encouraging investment and spending to recharge the economy," Lingle told lawmakers in a separate letter.

Lingle has until Tuesday to sign or veto any pending legislation, including the highly contentious civil unions proposal. She may also allow bills to become law without her signature.

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