Some Hawai‘i residents will get their tax cuts after all.
Gov. Josh Green announced in January that a series of tax cuts scheduled to take effect from 2027 through 2029 would “pause” in order to make up for an alleged $3 billion budgetary shortfall.
Those tax cuts had been set by a 2024 law that would incrementally reduce the state tax on residents' income each year through 2029. A bill introduced this year, Senate Bill 3125, would curtail the tax cuts yet to come, while preserving the cuts that have already been implemented.
By pausing the cuts, Green said in January that the state would have an additional $1.8 billion in revenue to work with.
As SB 3125 has progressed through the state Legislature, committees in the House and Senate have debated possible changes that might keep some or all of the previously scheduled tax cuts after all.
During a six-hour-long conference committee Tuesday evening, lawmakers hashed out a compromise that will retain the cuts for people in lower tax brackets.
The final version the committee agreed to will maintain the future cuts for single filers making under $175,000 per year, heads of household making under $262,500 and joint filers making under $350,000.
Meanwhile, the bill also includes a new income tax bracket for single filers making $500,000 or more, or households making $1 million or more. People in that bracket would face a 13% marginal tax rate; currently, the highest tax bracket is for single filers making more than $325,000 annually or joint filers making more than $650,000, and is subject to an 11% marginal tax rate.
To pay for the bill, lawmakers agreed to phase out a series of tax credits as proposed earlier in the legislative session, including a renewable energy tax credit of up to $500,000 for solar- or wind-powered energy installations and a capital goods excise tax credit that has stood since 1987 and allows businesses to be reimbursed for the general excise tax costs of purchasing new property.
At the same time, a childcare tax credit — which previous versions of the bill would have increased — will also be reduced.
“With this additional tax relief, we believe the expansion of other tax credits … will not be needed,” said Sen. Donovan Dela Cruz, chair of the Senate Ways and Means Committee during the conference committee hearing. “The Senate position has consistently been putting money into working families’ pockets every pay period is better than until the end of the year.”
Dela Cruz added that, according to the Hawai‘i Department of Taxation, more than 140,000 people who were eligible for the child care tax credit did not claim it.
A statement by the Senate Majority indicated that the feasibility of the bill is contingent upon discussions of House Bill 2500, the state budget bill. A conference committee hearing on that measure began Wednesday afternoon.
The tax cut measure must be submitted for a final reading by both chambers by Friday. Aloha State Daily requested comment from the governor’s office regarding Green’s intention to sign the bill.
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