Hawaii government can expect to collect more tax revenues than previously anticipated in the fiscal year that begins July 1, thanks to an influx of federal relief funds and tourism dollars.

The state Council on Revenues voted unanimously on Tuesday to adjust its forecast upward for the last two months of the current fiscal year as well as for each fiscal year after that. The council’s new revenue projections mean Hawaii could get an extra $450 million in tax revenues over the course of the coming year.

State tax collections are expected to top $7 billion this fiscal year, which ends June 30, and could hit at least $7.2 billion next fiscal year.

“We’ll probably be on a path that’s as high or higher than it would have been if we had not had this pandemic, in terms of the growth path for the next year or two,” Carl Bonham, a council member and economics professor at the University of Hawaii, said.

Waikiki Beach with more visitors arriving every day on Oahu during the COVID-19 pandemic.
A state panel expects Hawaii to collect more tax revenues as tourism comes roaring back. Cory Lum/Civil Beat/2021

Tax collections have already been bolstered this year by an increase in personal income taxes, which are up about 4% over normal years, according to Seth Colby, tax research and planning officer for the state Department of Taxation. Colby told the council that tax liability coming from unemployment payments helped out with that boost.

“It is mind-blowing, the fact that we had a pandemic and a strong year,” Colby said.

But the general fund has also gotten a huge boost from tourism tax dollars that have not been distributed because of Gov. David Ige’s executive orders.

Sen. Donovan Dela Cruz, chairman of the Senate Ways and Means Committee, said the new outlook is positive and should give lawmakers and the governor more flexibility when planning the next budget.

But, Dela Cruz said, lawmakers should still work prudently to reduce the size of government where appropriate and store any excess revenues in the state’s rainy day fund.

After that, Dela Cruz said money should be spent on growing industries and pivoting Hawaii’s economy away from tourism.

“It would be foolish if we don’t learn from this experience we just had,” he said.

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