Hope for Tax Relief Still Alive

by Tom Yamachika, President, Tax Foundation Hawaii

In the fast-paced, chaotic world that is the Hawaii Legislature this time of year, it is difficult to make any predictions about anything.  But there seems to be a glimmer of hope that some pieces of the Governor’s income tax relief bill, part of what the Governor’s office calls the “Green Affordability Plan” or GAP, will indeed cross the finish line.  But, and let’s not kid ourselves, there’s plenty of distance to travel and plenty of work that we all have to do if we want to make sure that the bill gets to the right place.

Let’s first take stock of where we are.  One of the pieces in GAP was an exemption from the General Excise Tax for food and medicine.  That proposal is now on the floor gathering dust.  The Senate bill, SB 1348, was heard by the Health and Human Services Committee but got deferred.  The House companion bill, HB 1050, was heard and passed out by the Economic Development and Health & Homelessness Committees, but didn’t receive a hearing in the Finance Committee. 

The GAP centerpiece bill, however, was a complex bill combining movement in the income tax brackets, increases in the personal exemptions and standard deduction, and boosts to a number of different tax credits that are available to lower income folks.  The Senate bill, SB 1347, was referred to the Senate Education Committee but was not heard by that committee.  The House Education and Economic Development Committees passed out the House companion, HB 1049, and House Finance basically cut the bill into three pieces.  The income tax relief provisions and the Hawaii earned income tax credit boost were spliced into HB 954.  The food/excise credit provision went into HB 493.  The other credits were left in HB 1049.  All three bills crossed over into the Senate, and all three bills received a single referral to WAM, meaning that only one Senate committee, Ways & Means, will be entrusted with the fate of all three bills.

Civil Beat recently reported that when Senate Ways & Means chair Donovan Dela Cruz briefed his members on the State budget, he said that the Senate would support a sizable slice of the Governor’s proposed tax changes.  Ways & Means has scheduled hearings on April 3rd for HB 954 and HB 1049, and has yet to schedule a hearing on HB 493.  It’s now hard to say which of the many parts of the GAP proposal will get through the Senate.

And, even though broad-based income tax relief is still contained in HB 954, there is no guarantee that it will survive a House-Senate conference even if it passes the Senate intact.  The Civil Beat article reported that House Speaker Scott Saiki is not a great fan of broad-based tax relief, saying that the House wants a simpler tax fix (whatever that might be) and is favor of a plan benefiting Hawaii’s neediest taxpayers rather than all taxpayers.

So here is where the people of Hawaii need to make their views known if they have a position on broad-based tax relief.  If simply left to their own devices, lawmakers could very easily say that revenue projections have been trending downward so it might not be prudent to pass tax relief for the “wealthy.”  By the way, if you are not in truly desperate circumstances (like, for example, the homeless person who recently died in front of The Queen’s Medical Center), congratulations, you’re wealthy.

To us, lawmakers also need to be concerned about the census data trending downward.  That tells us that people are jumping on one-way flights taking them away from Hawaii Nei.  That, of course, is a problem because if the cost of government rises, but the number of people who share in the cost of government goes down, guess what happens to the share that needs to be paid by the people remaining (wealthy or not).

If you have a view on this issue, now is a very good time to let your lawmakers know what it is.