Hawaii lawmakers approved a tax rebate for all Hawaii households Friday that is skewed to favor lower-income households, giving those families an extra bit of cash.
Senate Bill 514 would give a tax rebate of $100 per person to tax filers who earn more than $100,000 per year, and $300 per person to filers who earn less than that. The tax rebate package would benefit taxpayers who filed in Hawaii for 2021, and is expected to cost the state about $250 million.
The rebates would also be paid out for each dependent, meaning the amounts that individual families would receive would depend on household size.
Assuming the House and Senate approve the measure in floor votes next week — which appears extremely likely — it will be the first substantive state rebate or credit of its kind since 2007.
Gov. David Ige proposed in his final State of the State address this year a more modest rebate of $100 for all taxpayers and their dependents, but lawmakers initially gave that idea a lukewarm reception. However, state tax collections have boomed since then as the state economy rapidly recovered from the pandemic, and the tourism industry bounced back.
Once upon a time, tax rebates were mandatory when the state ran large surpluses, but the rebates have become scarce in recent years, according to the Tax Foundation of Hawaii.
The 1978 state constitutional convention drafted an amendment that required tax rebates or credits each time the state ran a general treasury surplus for two consecutive years, and the voters embraced that idea. Credits of up to $160 were approved in 2007, but more often lawmakers would approve a nominal $1-per-person credit when the refund requirement was triggered.
Then the voters in 2010 approved another constitutional amendment that changed the tax credit requirement to allow the Legislature to deposit money in the state’s budget reserve or “rainy day” fund in lieu of making refunds to taxpayers. There have been no more credits of any size under the 1978 constitutional requirement since then, according to the Tax Foundation.
The same bill will also deposit $500 million into the rainy-day fund, and will apply an extra $300 million to the Employees Retirement System, which is the public employees’ pension fund.
House Finance Committee Chairwoman Sylvia Luke described the measure as “a really good, well-rounded bill.”
Tom Yamachika, president of the Tax Foundation of Hawaii, said in a written statement that, “I’m glad that legislators are thinking of giving some of the surplus money back to taxpayers. It’s likely to be a one-time shot in the arm, but I think folks who have been suffering through the pandemic will be grateful for the help.”
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