In State of the State, Green proposes broad tax relief ― and wants it in place this year

It's one step he feels will help ease the financial hardship of many Hawaii families as he also looks to tackle homelessness.
Published: Jan. 23, 2023 at 5:38 PM HST|Updated: Jan. 23, 2023 at 5:47 PM HST
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HONOLULU (HawaiiNewsNow) - In his first State of the State address, Gov. Josh Green proposed a $312 million package of tax breaks designed to target low and middle-income families that also includes income tax cuts for higher income families.

The package replaced his campaign pledge to eliminate the excise tax on food and medicine.

Legislative leaders resisted that idea in favor of focusing on families that need the most help.

The governor said under his plan, families of four would save about $2,000 a year.

“For many, this is the equivalent of a full extra paycheck every year,” Green said.

The package also includes increases in tax credits for food, renters and the Earned Income Tax Credit, geared toward low-income families. Green would also adjust income tax brackets and personal exemptions for all incomes to adjust for recent inflation.

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Additionally, Green is proposing a $10,000 refundable credit for expenses associated with child care and family caregiving. He pointed out that almost all the money given out to families who need the help would circulate back into the economy.

“This plan will grow our economy ... and reduce the burden placed on family caretakers across our state,” he said. “This way, they don’t have to choose between a job and childcare, between rent and healthcare, between school supplies and dinner.”

At a new conference after the speech, Green said he wants the changes to take effect as soon as possible this year.

Incoming state Budget Director Luis Salaveria said the administration is already planning for a quick turnaround ― from approval to lower tax withholding rates.

“We are working with the Department of Taxation in order to create a comprehensive educational campaign to let people know that they can start reducing their withholding,” Salaveria said.

The speech focused on affordable housing, homelessness and reducing Hawaii's high cost of living.

In leaner times, lawmakers might have expressed concern about potential long-term impacts on the state budget. But instead, leaders’ only immediate concern was the package’s complexity.

“There is concern that if the paperwork it too onerous then they would not fill it out and we wouldn’t wind up helping those we are trying to help,” said Senate President Ron Kouchi.

Kouchi pointed out that the impact of the child care tax credit would be reduced when the state builds up free universal pre-Kindergarten, which would mean families would not have to pay as much up front for child care.

State Rep. Lauren Matsumoto, the House Minority Leader, was also pleased that tax relief was being proposed though Republicans still want elimination of the excise tax and food and medical services.

“What we are looking at was instead of piecemeal tax relief is looking at tax relief across the board,” Matsumoto said.

House Speaker Scott Saiki also said he was concerned about the difficulty people might have identifying all the tax changes that apply to them and filing for them properly.

“I am looking forward to working with the governor on a proposal that provides relief but is also simpler for taxpayers,”

Both Saiki and Kouchi said the specific one-time tax rebates of $300 per resident were successful and simple and could be increased and targeted without complex changes to the tax code.

The governor and budget director said the tax cuts are not only affordable, but necessary to avoid an excessive state surplus. It is about $2 billion right now. And if taxes are not cut, it could rise to $10 billion in six years.

Kouchi said the final form of tax relief will depend on the next report of the state Council on Revenues, which estimates future tax collections based on conditions in the economy.