For most of us, Hawaiʻi’s high cost of living is the issue that weighs on our minds at all times. We scroll through pages of rental listings that ask $2,000 a month or more for run-down cinderblock units built in the 1970s — utilities not included.

We feel it when grocery prices slowly but surely rise, making it harder to put food on the table. Every year, we watch luxury high-rises fill up Honolulu’s skyline, while more locals are leaving Hawaiʻi, or living out of their cars and out on the streets.

For a typical adult in Hawaiʻi, the bare minimum needed to afford their basic needs, like rent, food and transportation is about $62,000 a year. For a single parent who’s taking care of just one child, that number leaps to $102,800. By comparison, the state’s median income for a full-time worker was barely $60,000 in 2023.

The result is that some 44% of local households now belong to the Asset Limited, Income Constrained, Employed category. This means that almost half of the population cannot pay their bills on time while also saving money for emergencies, no matter how hard they try to limit their expenses.

Lifting People Up

I am constantly reminded of how difficult it is for the middle-class to make ends meet, much less someone who earns close to the minimum wage. However, there’s a powerful lifeline that the government has used for decades to lift up people who are struggling: delivering money through tax credits.

Tax credits like the Child Tax Credit and Earned Income Tax Credit have been responsible for historic declines in poverty throughout the U.S.:

• The federal CTC alone lifted 2.9 million children out of poverty when it was temporarily expanded in 2021.
• In 2017, Hawaiʻi created a state-level EITC to supplement the federal one. In 2023, this state EITC was increased from 20% to 40% of the federal EITC. Combined, the federal EITC and Hawaiʻi’s EITC brought $272 million in tax relief to 82,000 local households for that year.

This year, our legislature has the opportunity to build on the proven track record of the CTC and EITC. Senate Bill 1013 would further boost Hawaiʻi’s EITC to 50% of the federal credit for qualifying local families with keiki.

At a cost of $30 million per year — a tiny fraction of the state’s budget — this expanded EITC would offer an average of $534 in additional tax relief to families with children making less than $27,700 a year, and $604 for those earning between $27,700 – $57,100.

Compare this with the benefits provided by last session’s House Bill 2404, signed into law as Act 046 (2024). This act lowers taxes for people across the income range, but the data shows that most of these savings will go to middle- and high-income families, leaving families at the bottom behind.

Once taxes are filed for 2025, people making less than $27,000 will see an average tax cut of $335 from Act 046. At the other end, people earning above $678,000 — the top 1% — will get an average tax cut of over $6,000.

By 2031, when the changes are fully phased-in, those tax cuts will have grown to just $439 for the bottom 20%, while ballooning to $12,800 for the top 1%.

This approach will cost at least $240 million in Fiscal Year 2025, climbing to over $1.45 billion by FY 2031.

When we’re thinking about tax policy, we can’t lose sight of who needs the most help. For a millionaire, $6,000 is a drop in the bucket, not a matter of survival. In the case of a single parent working two jobs, an extra $500 or $600 could mean making their rent for the month, catching up on a credit card payment, or buying new clothes for their keiki.

Unless we devote more resources to our friends, family, and neighbors who are struggling to get by, the dream of a thriving Hawaiʻi will continue to fade away. Instead, we’ll be left only with half-empty high-rises, mansions, and vacation homes in our neighborhoods, spread between shopping malls — devoid of the working class communities that made them flourish.