Earlier this week, Gov. Josh Green unveiled his Green Affordability Plan, a proposal to reform the state’s tax code for every income bracket.
“By doubling the personal exemption, you see that that helps everybody, even people that are making more money,” Green said.
The plans outlined in Green’s tax reforms would be expansive. It would change the state’s income tax by increasing personal exemptions to inflation and increasing the standard deduction to $5,000 for single filers and $10,000 for joint filers.
The plan also proposes increasing the earned income tax credit from 20% to 30%, which would potentially benefit many low-income families.
Green estimates it to cost the state around $312 million, and possibly save the average family of four about $2,000 annually.
He has said that he prefers this tax shift over repealing the state’s general excise tax on food and over-the-counter medicine, which he previously pushed for in his December inauguration speech.
Green said this tax plan would be much more targeted.
“We favor this pack plan over other tax plans,” Green said. “I still like getting rid of some of the taxes on food and medicine, those are not targeted at all. They’re very regressive, but 30% of the general excise tax on food medicine does go to people who travel here, and I want them to be paying fees and taxes.”
A bill similar to the GET repeal Green talked about was introduced as part of the state House minority caucus package, so it may still have a chance. Rep. Elijah Pierick of Oʻahu said the savings would be vast.
“If food was excluded from the excise tax, an average two-person family would save at least $400 per year, larger families would save even more,” he said last week when the GOP House caucus introduced several cost-of-living specific bills.
President of the Hawaiʻi Food Industry Association Lauren Zirbel said she is in favor of a GET repeal on groceries.
During an interview last week, Zirbel said the current food excise tax credit could make a bigger impact.
“For example, a single individual making over $30,000 a year qualifies for $0 in refundable food excise tax credit,” Zirbel said. “A married couple making $41,000 a year qualifies for $35 from the refundable food excise tax credit, which is really nowhere near the amount of money these individuals are spending on grocery taxes per year.”
The food tax credit would double under Green’s affordability plan, and it would also increase the threshold for eligible households. Green estimates this would benefit nearly 34% of state taxpayers.
However, these ideas are just a proposal for now. State Director of Budget and Finance Luis Salaveria said that if it were to pass, the impacts could be immediate.
“What we are doing right now is we’re working with the Department of Taxation in order to create a comprehensive educational campaign to let people know that they can actually start reducing their withholdings in order to have the larger paycheck,” Salaveria said Monday.
“You could have it with a larger refund come tax planning, or you can actually have it in your actual monthly or bi-weekly paychecks.”