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Governor Signs Earned Income Tax Credit Bill Into Law

Wayne Yoshioka

A new law to provide relief to low income workers in Hawai’i was signed today.  HPR’s Wayne Yoshioka reports.   

Governor David Ige signed House Bill 209 into law, establishing a state earned income tax credit.

“The intent of this legislation is to help Hawai’i’s low and moderate income families keep more of what they earn.  It’s currently estimated that the lowest income households pay 13 percent of their income to state and local taxes, while those in the top income brackets pay less than 8 percent.”

Representative Aaron Johanson introduced the measure which could help more than 107-thousand people who also claim the federal earned income tax credit.

“This is equivalent to $130 million over 6 years for Hawai’i’s working families and most of those claimants can claim an extra $110 for the refundable food excise tax credit at these higher, now permanent rates.”

This anti-poverty legislation will be off-set by higher rates for those earning more than $300-thousand annually.   These higher rates expired in 2015 but are being reinstated at 9 percent for $300-thousand a year earners, to11 percent for those earning more than 400-thousand.  But, Hawai’i Appleseed Center for Law and Economic Justice Co-Director, Victor Geminiani, says lawmakers provided a non-refundable tax credit which does not return cash to low income families.

“They made a decision to make it non-refundable and that means about 2/3rds of the people who would have benefitted under our refundable EITC program are not going to benefit.  A lot of the people don’t owe more taxes.  They’ve already paid them through a variety of different taxpaying mechanisms – withholding for example – so they can’t collect any dollars that are left over which is really where the major benefit of the program is.  So we hope to be able to make it refundable sometime in the near future.”

House Finance Committee Chair, Sylvia Luke, recognizes that money back in the pockets of low income workers would have a greater impact.  But, she says, refundable tax credits have a dubious track record.

“One of the reasons why we did it on a nonrefundable credit as opposed to a refundable is EITC was one of the taxes that nationally different taxing organizations have looked at as something that has a big error and fraud rate and so because this is the first time we’re doing this in a long time we decided – okay – we’d better take a little bit of a cautious approach doing it.”

The new anti-poverty tax law takes effect for the 2017 income tax year.   Wayne Yoshioka, HPR News.

Wayne Yoshioka
Wayne Yoshioka is an award-winning journalist who has worked in television, print and radio in Hawaiʻi. He also has been on both sides of politics as a state departmental appointee and political/government reporter. He covered Hurricane Iwa (1982) as a TV reporter; was the State Department of Defense/Civil Defense spokesperson for Hurricane Iniki (1992); and, commanded a public affairs detachment in Afghanistan (2006). He has a master's degree in Communication from the University of Hawaiʻi at Mānoa and is a decorated combat veteran (Legion of Merit, Bronze Star and 22 other commendation/service medals). He resides in Honolulu.
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