Alternatives to ‘pausing’ Hawaii’s income tax cuts

by Keli'i Akina, Ph.D., President / CEO, Grassroot Institute of Hawaii

Remember that historically big tax cut passed in 2024 that was supposed to save Hawaii taxpayers more than $7 billion through 2031?

Well, I hope you didn't count your chickens before they hatched because now it appears those phased-in cuts are already in danger.

I had been hearing rumblings that Gov. Josh Green was intending to "pause" those historic cuts, allegedly to cover $1.8 billion in unidentified expenses over the next few years. And that was confirmed publicly earlier this month after my colleagues at the Grassroot Institute of Hawaii submitted public information requests to officials at the state Department of Budget and Finance.

But all hope is not lost. A Grassroot analysis of the governor’s proposed budget shows that rather than walk back the tax cuts, the Legislature could simply identify and reallocate about $350 million a year in current state funding to make up for the governor’s projected expenses.

And that might not be as difficult as it sounds. Here’s why:

>> The state’s many special, revolving and trust funds are collectively anticipated to hold more than $5 billion in the upcoming budget year, several hundred million of which the state auditor has said could be accessed without adversely affecting the programs they support. We shouldn’t let this money keep going to waste.

>> Each year, the state sets aside funding for thousands of unfilled positions. The current budget features salaries for more than 4,600 vacant positions that add up to more than $350 million. The affected departments might want to retain access to those funds, but eliminating positions that have gone unfilled for years would be more fiscally responsible.

>> Legislators have access to performance metrics for all state programs that show whether they are underused or can operate effectively with limited staff. This information should be used as intended to ensure that taxpayer money is not being spent on wasteful or ineffective programs.

>> Many state programs and expenses simply shouldn’t be the responsibility of the government to fund. The Hawaii Tourism Authority, for instance, should be supported by the visitor industry alone. Instead, the governor’s budget proposes propping it up with $66 million next fiscal year. Other state expenses that could be shed include spectator events and shows, private industry loans and managing fleets of cars.

The point is, there is no need to panic about the state’s finances and hit “pause” on phasing in the unanimously approved tax cuts — which were implemented at the governor’s own initiative, after all.

The money is there. Our state lawmakers just need to look for it.

E hana kākou! (Lets work together!)