Higher tax credits are coming to many Hawaii residents next year, representing about $104 million worth of relief targeted for the state’s lowest-earning families.

Gov. Josh Green signed a tax relief bill and the state budget bill into law Friday at the Capitol. He was joined by numerous officials including House Speaker Scott Saiki and Senate Ways and Means Committee Chair Sen. Donovan Dela Cruz.

This part of the economic package is just phase one, Green said, with phase two to come next year.

The budget negotiation process at the end of this year’s legislative session drew criticism for being obscured from view. Eight lawmakers in the House voted no on the bill, citing concerns related to a decrease in funding for public education and the University of Hawaii in a contrast to what is normally a routine vote.

Hawaii’s state budget covers two fiscal years, in this case 2024 and 2025. Fiscal year 2024 starts Saturday.

Certain priorities took center stage. Hawaii’s notorious cost of living, exacerbated by a housing shortage, was the governor’s main focus when talking about how the tax relief bill and the budget bill could work together.

“People in society are desperate,” he said. “Some people — often young people — don’t feel hope, they don’t think there’s going to be a future for them. They don’t have a house they can see in the future for them, they don’t see where they’re going.”

The goal is to reverse that mindset, he said.

The tax relief bill’s final version emerged at a slim five pages. Notably, it doubles Hawaii’s earned income tax credit and raises income thresholds and monetary amounts that people can receive through the food excise tax credit.

Hawaii’s earned income tax credit is calculated as a percentage of the federal earned income tax credit. 

Previously, that credit was 20% of whatever a filer received from the federal government. The new law doubles this to 40%.

For example, a two-child family that qualifies for the federal credit – meaning they earn no more than $59,478 if filing as married, or $52,918 if filing as single – would receive a maximum of about $6,600 on their federal tax return. 

Under the old setup, their Hawaii state tax return would have given them approximately $1,320 more. Now, that number would go up to about $2,640.

It’s not the full economic package that Green had hoped for at the beginning of the legislative session. In his State of the State speech, he had listed other measures like adjusting state income brackets and adding new excise tax exemptions.

These items didn’t make it into the tax relief bill, House Bill 954. Green said that he and Luis Salaveria, director of the Department of Budget and Finance, plan to revisit them in the upcoming year.

“Indexing, increasing the personal exemptions — all of those things are things that we definitely want to approach in phase two,” said Salaveria.

Green added that these things will be more complicated, and that for now they opted for simpler forms of relief.

“There was a method to the madness,” he said. “These were things that could be easily implemented, people could understand. Again, we didn’t have a lot of time to explain to the people of our state exactly what the details would be.”

The budget, House Bill 300, includes over $500 million for developing new housing and infrastructure, including $280 million to develop more affordable housing units and $50 million for teacher housing, down from an allocation of $170 million.

Other notable budget expenditures included $48 million for tiny home villages for homeless people known as kauhale and $38.8 million to expand the Preschool Open Doors program, which subsidizes families who want to enroll their children in preschool.

Green also highlighted investments in the medical field like $30 million toward the Hawaii State Loan Repayment Program to help social workers, health care workers and therapists pay off student loan debt if they stay and work in Hawaii.

Earlier in June, the governor slashed $71 million in funding for a controversial project spearheaded by Sen. Donovan Dela Cruz to build a controversial first responders campus in central Oahu. Green also announced last week his intent to veto a bill that would have changed the board composition of the Hawaii Technology Development Corp., which would have overseen development of that campus.

A board member, Vassilis Syrmos, had been targeted for removal after he spoke against the project.

Ten other bills were included in the governor’s intent to veto announcement, which is always given so that lawmakers have an opportunity to decide if they want to enter a special legislative session to override any of the governor’s vetos. A Senate press release issued late afternoon Friday said that lawmakers opted to not do so this year.

Part of the rush at the end of budget negotiations included setting aside $200 million for the governor to use at his discretion, which critics like Rep. Della Au Belatti referred to on the House floor as a “slush fund.”

Green has said that this money will go toward funding public education, the University of Hawaii and the Hawaii Tourism Authority, which this year survived dissolution-via-bill by the skin of its teeth.