State sees banner year for tax revenues, but faces highly uncertain future
The state Council on Revenues expects a strong end to this fiscal year. But there are concerns for fiscal year 2023, which starts in July.
The council projects Hawaiʻi will end the current fiscal year with a 28% growth in tax revenues over FY 2021. But several factors caused them to temper expectations, and consider single-digit growth in the upcoming fiscal year 2023.
The state Department of Taxation reported a record-breaking month in general excise tax revenue in April — collecting nearly $1.4 billion. That's a 40% jump compared to April 2021, and a 33% overall increase in tax revenue from the previous fiscal year.
With the summer visitor season just starting, the tax department still expects growth in May and June. But at a more modest rate, between 8% and 10%.
Council members acknowledged Monday that inflation is playing a role in the higher tax collections. While it may be beneficial to state funding, it does impact the cost of living for local residents.
Members are also concerned about how ongoing inflation, supply chain issues, and anticipated higher interest rates from the Federal Reserve will impact future economic activity in the state.
While growth is expected to continue in the coming months, long-term uncertainty led the council to forecast a modest 5% growth for fiscal year 2023.