By Keli‘i Akina
Hawaii residents have long been asking lawmakers to help lower the state’s high cost of living.
This year, Gov. Josh Green and the Legislature showed they were listening by passing the biggest income tax cut in state history and literally reducing the cost of living for every Hawaii resident.
In the face of such a monumental reform, it seems incomprehensible that anyone would criticize a tax cut that puts money back in the pockets of working families. But that’s exactly what is happening.
Not only that, critics of the governor’s tax plan are playing some funny games with the numbers, making me wonder if they are intentionally trying to mislead people about what’s really going on.
For example, the Institute on Taxation and Economic Policy, based in Washington, D.C., claims that 42% of the benefits from the new tax cut will accrue to the top 20% of earners.
The group, which believes that the fairest tax system is one in which the tax rates increase along with income, also says that the bottom 20% of Hawaii earners who make less than $27,200, will get only a $335 tax cut.
That is all true, but stated in a misleading way.
The more meaningful way to look at it is that a family making the median income of $91,100 is going to save more than $1,500 this year, and by 2031, their taxes will decrease by 69%.
And because Hawaii has 12 income tax brackets — the most in the country — that increase as one’s income increases, everyone below the median will save larger percentages and everyone above it will save lower percentages.
Meanwhile, Hawaii’s standard income-tax deduction will be increasing from $4,000 to $24,000 by 2031, so the person making $27,000 a year isn’t going to have much of an income-tax payment at all.
In fact, Hawaii residents in the lowest tier of earners will be going from the second-highest state income-tax burden in the nation to the lowest out of the 42 jurisdictions — 41 states and the District of Columbia — that impose income taxes, while average working families will see their state income tax burden dropping from second highest to the third lowest.
Critics of the governor’s tax cut are also worrying that Hawaii cannot afford it.
However, I say we cannot afford to not cut taxes.
For years, Hawaii’s governments have been stuck in a spiral of high spending and high taxes — the result being a stagnant economy and a state we can’t afford to live in.
Hawaii’s high cost of living is being driven even higher by inflation, and people are leaving the state for better opportunities as many of Hawaii’s beloved local businesses are closing their doors.
The governor’s tax cut is not fiscally irresponsible — it is a meaningful reform that will lower the cost of living for local families and encourage economic growth.
Please don’t be fooled by shell games about who pays how much tax. This historic tax cut is exactly what we have been asking for — a reform that will make a big difference to ordinary working families.
And the governor and our legislators — who supported the state income-tax cut unanimously — deserve credit for finally pushing through such a groundbreaking measure.
My hope is that this is the beginning of a new era for Hawaii.
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Keli‘i Akina is president and CEO of the Grassroot Institute of Hawaii.