How does the most Democratic state in the union treat its poorest citizens? Not very fairly, if we look at how the state tax system works.

Consider the general excise tax: amidst all the lobbying for its extension to meet the ballooning cost of rail, proponents do not always point out that the hardest hit by the GET are those with lowest incomes. This is because low-income earners spend the lion’s share of their income on food and other basic necessities on which the GET is applied. Prices for these essentials are nearly 70 percent higher than the national average. As a share of family income, the GET impacts low-income workers almost 10 times harder than it hits the top 1 percent.

Tax Credit

Hawaii recognized this in 2007 by creating a refundable food/excise tax credit. This allows tax filers who earn less than $50,000 per annum — or less than $30,000 for single filers — to claim up to $110 per qualified exemption.

This provides some relief to families especially hard hit by the GET. The less they earn, the more of a tax credit they get. It’s a mechanism for fairness that was updated in 2015 to catch up with inflation.

However that tax credit adjustment is due to expire at the end of 2017.

If legislators fail to act to remove the sunset during the upcoming session, the credit will revert to its original level, resulting in a loss of almost 25 percent of its current value.

If we agree that it is unfair to make the people who have the lowest incomes carry a disproportionate burden of the GET, there are two immediate steps we need to take.

First, we need to update the refundable food/excise tax credit to catch up with inflation over the past two years, and simultaneously schedule cost-of-living adjustments for the next four years so we don’t leave families vulnerable to the inevitability of rising costs.

Second, to allow families to qualify for this credit, we must raise the income thresholds for eligibility to reflect the impact of inflation, and put in place increases for the next four years.

This is not a matter of charity. It is a matter of justice and sound public policy.

While food costs, and GET as a percentage of that cost increases automatically along with inflation, what people get back in the form of tax credits is a fixed dollar amount. In real terms therefore, Hawaii residents are being asked to shoulder a heavier and heavier burden every year.

And those with the lowest incomes are hit the hardest. One of the consequences of this unfair tax burden and inflation is the continuing spectacle of families finding themselves living on the streets as their basic living expenses rise faster than their wages, and the buying power of those wages continues to decline.

Legislators can repair this injustice in the coming legislative session. And voters should be attentive to whether they do so or not.

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