The Impact of the Federal Tax Cut and Jobs Act on Hawaii Households
From DBEDT, March, 2018
Executive Summary
The Tax Cut and Jobs Act (TCJA) was signed into law December 22, 2018. The TCJA has many provisions which will impact Hawaii individual taxpayers in different ways depending on their filing status, income bracket, home ownership status, and family composition. This report examines the impact of the TCJA on Hawaii individual taxpayers’ federal income tax returns using statistics compiled by the IRS for Hawaii taxpayers. While the results vary by income group and filing status, a majority of Hawaii taxpayers will pay less in federal income taxes in years 2018 through 2025, after which most of the provisions expire. The analysis of the TCJA of Hawaii residents’ federal individual income tax liability for tax year 2018 shows that:
On average, the provisions of the TCJA will result in lower tax liabilities for most income groups in Hawaii. The higher income groups will see increases in tax liability.
• The substantial increase in the standard deduction will benefit the lower to mid-range income groups.
• In general, taxpayers filing jointly will benefit more under the TCJA than single filers and head of household filers.
• The standard deduction nearly doubles for all filing status categories under the TCJA. A significant number of filers in the mid-income range will shift their filing behavior from itemized to standard deduction due to the increase in the standard deduction.
• Under the TCJA personal exemptions are eliminated. However, this is usually more than offset by the doubling of the standard deduction as noted above.
• The TCJA doubles the child tax credit from $1,000 to $2,000, which will benefit Hawaii households with children. Furthermore, there is an increase in the refundable portion up to $1,400.
• A majority of the higher income groups will continue to itemize their deductions and, thus, will not benefit from the increase in standard deductions.
• Higher income groups will be impacted by the $10,000 cap on state and local tax (SALT) deductions, with those in the top two income brackets being hit especially hard.
• While a majority of Hawaii’s individual taxpayers will have a reduction in federal income tax liability, the two AGI categories above $500,000 will experience an increase in their tax liability for the 2018 tax year, mostly due to the SALT cap provision.
It should be noted that this analysis does not include corporations, which will see a substantial decrease in their federal tax liability, as the corporate tax rate of 35 percent (top bracket over $10 million) is reduced to a flat rate of 21 percent.
In summary, the decrease in the tax liability for the lower to mid-income ranges is primarily due to the reduction in the applicable tax rates, the increase in the standard deduction, and the doubling of the child tax credit. For the top two income categories, a large portion of these benefits are offset by the $10,000 cap on the SALT deduction. The table below provides an overall estimate by income category based weighted averages for individuals and the total for each respective category. Under the TCJA for tax year 2018, the aggregate federal income tax liability will be an estimated $710.06 million less than 2017 under the previous law. This does not include corporate income tax.
read … Full Report
Coverage:
PBN: Hawaii households to see $710M reduction in federal individual income tax for 2018
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Flashback December 21, 2017: Tax Cut Makes Hawaii Democrats Bitter, Spiteful
HTH: …“When you look at the broad position as opposed to the narrow ones, it’s overall going to be helpful in that it will allow the middle class to take home more money,” said Tom Yamachika, president of the Tax Foundation of Hawaii. “And hopefully it will stimulate the economy. What kind of effect (it will have) we don’t know until we see in two or three years what’s actually happened.”
State Sen. Josh Green, D-Kona, Ka‘u, agreed with Yamachika that GOP projections of economic growth remain largely speculative, but that’s where the consensus ended.
“This is as bad and cynical and mean-spirited a bill as I’ve ever seen,” Green said. “Whoever says that this is good for Hawaii families should turn in their credentials. They don’t know what they’re talking about.”….
read … Cynical LOL!
Mean-spirited cynicism: