A controversial tax hike that would have reaped an extra $1.8 billion over six years from the state’s highest-income taxpayers now appears almost certain to die in the House.

Senate Bill 56 was passed by the state Senate on Tuesday. But supporters were dismayed to see House Speaker Scott Saiki give the measure a quadruple referral this week — meaning he assigned the bill to four House committees that must each hold hearings and vote in favor of the measure before it can pass.

According to the internal rules and deadlines of the Legislature, the bill must be heard and approved in three of those four House committees in less than two weeks, which would be extraordinarily difficult for such a complex and far-reaching measure.

Tax Office Keelikolani Building 830 Punchbowl Street.
A Senate bill raising raising the tax rate for high-income Hawaii taxpayers appears to be dead for the year. Cory Lum/Civil Beat

“It makes it almost impossible to pass this bill because especially during the COVID session, they’ve compressed the calendar,” said Nicole Woo, director of research and economic policy for the Hawaii Children’s Action Network.

Woo said supporters of the bill are hoping they can convince House leaders to re-refer the bill to fewer committees to give it a better shot at survival, and launched an online campaign to do so.

But that also appears unlikely.

House Democratic Majority Leader Della Au Belatti agreed the bill is as good as dead, saying lawmakers have heard a great deal of opposition to the measure from constituents. “Lots of folks are emailing about this particular bill,” she said.

At the start of session in January, lawmakers were much more open to increasing taxes because they were worried the decline in tax collections during the pandemic had created a gaping budget shortfall.

But Au Belatti said that changed when Congress passed the American Rescue Plan, which includes a $1.6 billion cash bailout of state government. That helped to sink the bill, she said.

“There’s opposition mounting in the community, there is the changing landscape because of the American Rescue Plan, and because we want to focus on other things,” she said.

The measure is one of an array of tax increase measures lawmakers have been considering this year to raise cash to balance the state budget, but SB 56 stands out because it would push the state’s top income tax rate for the highest earning residents from 11% to 16%.

That would make Hawaii’s top income tax rate the highest in the nation. The new, higher rate would apply to single filers who earn more than $200,000 a year, and to joint filers who earn more than $400,000 per year.

Supporters of the bill contend it would force the state’s wealthiest residents to pay a larger share of the cost of providing state services, making the state tax system more fair.

But state Tax Director Isaac Choy predicted Friday that if the bill passes, wealthier Hawaii residents will leave the state.

“You’re actually allowing the people with the wherewithal to move to move, and those people are not the homeless people, right? They’re the people with money, so we’re going to end up with people of lesser means staying, and the guys with means moving.” he said.

“I don’t know if that’s good policy. In fact, I will say that is bad policy,” he said. However, Choy said he did not know if Gov. David Ige would support the bill if it makes it that far.

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