New policy brief proposes targeted tax relief for struggling Hawaiʻi families

Act 046, introduced in 2024 by Gov. Josh Green through his Green Affordability Plan, is legislation aimed at providing tax relief to Hawaiʻi residents. However, the Hawaiʻi Appleseed Center for Law & Economic Justice claims that during the course of the 2024 legislative session, the governor’s proposal was “radically altered by lawmakers behind closed doors during the conference committee phase.” Hawaiʻi Appleseed is proposing tax credits that target assistance only to Hawaiʻi’s struggling families.

“While the final bill still provided tax relief, these closed-door changes shifted the bulk of the benefits up the income scale to middle- and high-income earners,” said Devin Thomas, Hawaiʻi Appleseed senior policy analyst for taxes and budget. “The result is a policy that mostly helps families that don’t need the assistance, while leaving behind the families struggling to survive with low wage jobs, and most in danger of homelessness or being priced out of Hawaiʻi.”

Hawaiʻi Appleseed’s latest policy brief explores two tax credit strategies aimed at providing relief to local families struggling with the high cost of living, particularly those with children. It claims these families are most affected by Hawaiʻi’s financial challenges, and the brief highlights how Act 046, introduced in 2024, disproportionately benefits middle- and high-income earners.

The brief shows that the bottom 20% of Hawaiʻi households will receive an average tax savings of just $335 this year, while the top 1% will save around $6,000. By 2031, the gap will widen, with the bottom 20% receiving just $440 on average, while the top 1% will save $12,800. While $335 offers some relief, Hawaiʻi Appleseed argues that it doesn’t significantly improve the long-term financial situation for struggling families.

As local families continue to leave Hawaiʻi due to the high cost of living, Hawaiʻi Appleseed stresses the urgency for additional legislative action to help those at risk of homelessness. “Targeted tax credits are a proven, effective tool for delivering assistance to the families that actually need it,” Thomas said.

The brief proposes two potential strategies:

1. State-Level Child Tax Credit (CTC): This would provide a credit of up to $650 per child, phased out at incomes above $40,000 and capped at $115,000 per household. Families in the bottom 20% would see an average tax savings of $996 per year. The estimated cost of this policy is $83 million annually.
2. Expanded Earned Income Tax Credit (EITC): This would raise the value of the state EITC to 50% of the federal EITC for households with children. The expanded EITC would provide an additional tax cut of $512 on average, costing the state about $30 million annually.

The Child Tax Credit proposal costs significantly less than the $1.2–$1.4 billion annual cost of Act 046. View the full policy brief here.

These proposed bills, CTC (HB694/SB1053) and EITC legislation (HB182/SB1013), were referred to State Senate committees after passing on first reading earlier this legislative session.

“Time is running out to keep Hawai‘i’s struggling local families rooted here,” said Will White, Hawaiʻi Appleseed’s interim executive director. “It’s not too late for lawmakers to take action this session.”