With the eighth highest median income in the nation and the fourth highest number of millionaires per capita, Hawaii is in some ways one of the richest states.

Yet, many of our working families are feeling stretched beyond capacity. The increase in cost of living in Honolulu has outpaced the increase in median household incomes. Residents of Hawaii are the most likely to live paycheck to paycheck. Families have to spend more to make ends meet, pushing people to their financial edge.

Poverty describes a person’s ability to afford the basic necessities of life: food, shelter, clothing, transportation. When we say a person is experiencing poverty, we mean that person can’t afford the foundations for a healthy life. In 2015, the poverty threshold for a family of three in Honolulu was $34,056 according to the supplemental poverty measure.

Hawaii's imbalanced tax system taxes the poor at higher rates than the wealthy, contributing to more poverty throughout the state.
Hawaii’s imbalanced tax system taxes the poor at higher rates than the wealthy, contributing to more poverty throughout the state. Cory Lum/Civil Beat

One in nine residents and one in seven children live in poverty. To put it another way, the estimated 156,730 people living in poverty is almost equal to the number of people living on Maui, making Hawaii’s poverty rate the sixth highest in the nation.

Some of the conditions that make it difficult for families to get by, such as our high food and housing costs, are difficult to control. But our imbalanced tax structure, which taxes people into poverty, is among the conditions we can control.

Our state has one of the most regressive tax structures in the country and we are the second worst in the nation for taxing our lowest earners. The effective tax rate for our low-income residents is almost twice the rate that our wealthiest residents pay. Top earners — those earning over $375,000 — pay a mere 7 percent of their income in taxes, while those earning less than $18,000 pay more than 13 percent.

This inequity is due in large part to our heavy reliance on the general excise tax, which is applied to nearly every purchase of a good or service, including basic necessities such as food and rent. GET raises almost half of our state’s revenues. Initially set at 1.25 percent, the GET is now 4 percent and legislation has been proposed for this Legislative session that would raise it again.

The estimated 156,730 people living in poverty is almost equal to the number of people living on Maui, making Hawaii’s poverty rate the sixth highest in the nation.

Beyond requiring our lowest earners to pay a greater share of their income in taxes, we also offer our higher earners a litany of tax breaks. We offer deductions and credits for home buyers, though almost half of our households are renters and many home purchases go to out of state buyers.

We tax capital gains at a preferential rate. And last year we allowed a $48.6 million tax break for the wealthiest households — 93 percent of the tax cut went to the top 1 percent.

Hawaii’s imbalanced tax structure is not only inequitable, it just does not make sense. The state is heavily taxing low-income people at the same time it is providing social services programs to help lift people out of poverty — we are lifting people up with one hand while pushing them down with the other.

We need to balance Hawaii’s tax structure, and two good ways to do it are the Earned Income Tax Credit and the Low-Income Housing Renters Credit — crucial components of our safety net. We can help to catch people who slip into poverty and assist those who are trying to climb out.

On the other hand, continuing to tax people into poverty, spending millions of state revenue on tax breaks for the wealthy, and requiring our lowest earners to pay the greatest share in taxes, are only likely to increase poverty.

It’s time to make real, significant changes for the future prosperity of our families, children, and state.

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