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State budget windfall opens way for tax cuts

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The following is a news released issued by the Grassroot Institute of Hawaii on Dec. 23, 2021.
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Grassroot Institute of Hawaii calculations show there is plenty of room for the Legislature to break its habit of continually increasing taxes

HONOLULU, Dec. 23, 2021 >> Gov. David Ige’s fiscal 2023 general fund budget shows revenues are up $252 million more than last year,[1] but could be up to $1.7 billion more than that because of economic activity that has been generating more tax revenues than expected.[2]

The state’s incoming revenue is so great right now that the governor said this week he will not propose any new taxes this year.[3]

Members of the state Legislature might have other ideas about that, but the recent influx of federal aid and tax revenues shows there is plenty of room to work toward tax reduction, said Keli‘i Akina, president and CEO of the Grassroot Institute of Hawaii.

“Hawaii residents deserve some much-needed relief from the state’s exceptionally high cost of living,” said Akina. “It would be a shame if state lawmakers squandered this opportunity to give everybody a break from the usual fare of increased taxes, year after year.”

He said: “The governor might even wish to consider promising to veto any tax increases, period. And based on a recent poll the institute commissioned, I’m pretty certain most Hawaii residents would stand behind him for that.”[4]

According to the state Council on Revenues projections in September, state general fund revenues for fiscal 2023 were expected to grow at 4% compared with the previous year.[5] But for the first five months of fiscal 2023, the revenues have been flowing in at an “astounding” 27.3% higher rate than the year before, according to the governor[6] — or about $737 million so far, Grassroot Institute of Hawaii calculations show.[7]

The institute calculated that if the revenues continue at that pace, the total by the end of fiscal 2023 could be about $1.7 billion higher than expected. If they were to grow at even half that pace for the rest of the fiscal year, the total would be about $700 million more than the Council on Revenues predicted.[8]

The resulting revenue windfall would be in addition to the $1 billion of federal American Rescue Plan aid infused into the state’s fiscal 2022 budget, and the $286 million added to the fiscal 2023 budget.[9]

“The revenues are indeed ‘astounding,’” Akina said, “especially considering that most of it has come from a meager reopening of the economy. Imagine what could be accomplished if lawmakers and the governor were more focused on reopening all aspects of our economy.”

Akina added: “Lawmakers are sitting on a bonanza, and they should find ways to return unneeded cash to the taxpayers.”

While Ige’s proposed budget does not include a tax increase, there is no doubt several tax bills will surface once the legislative session begins next month.

Already, there are calls for new “revenue generation” tools.[10] The same day the governor released his budget, the Hawaii Tax Commission also released its biannual report in which it recommended a litany of new taxes.

Among other reforms, the commission suggested:

>> A $100 million carbon tax, to incentivize cleaner energy, 80% of the proceeds of which would be rebated to taxpayers.

>> Taxing public pension income to the tune of $50 million per year.

>> Creating a “Committee on Fiscal Responsibility and Sustainable Government Spending” to review the state’s taxing and spending policies.

>> Repealing certain little-used general excise tax exemptions.

But according to Akina: “Tax hikes were unnecessary last year, and they are unnecessary now. Lawmakers should reject any calls for more taxes on a public that largely opposes such measures.”

Akina referenced a survey conducted earlier this year for the institute by marketing research firm Anthology, which showed that 70% of nearly 1,000 Hawaii respondents believed their taxes were too high, and 81% opposed paying more.[11]

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[1] The FY 2023 Executive Supplemental Budget,” Department of Budget and Finance, Dec. 20, 2021, p. 3, which shows total revenues of $8.6627 billion in fiscal 2023, which is $252 million more than $8.4106 billion in fiscal 2022.
[2] Grassroot Institute of Hawaii calculations of FY 23 windfall,” Grassroot Institute of Hawaii, Dec. 22, 2021. Grassroot Institute of Hawaii calculations confirmed via email by the state Department of Taxation on Dec. 22, 2021.
[3] Kevin Dayton,The Rebound In State Tax Collections This Year Is ‘Astounding,’ Ige Says,” Honolulu Civil Beat, Dec. 20, 2021.
[4] “Most Hawaii residents want lower taxes, new survey shows,” Grassroot Institute of Hawaii, Oct. 13, 2021.
[5] Council on Revenues,” Hawaii Department of Taxation, Sept. 9, 2021, p. 2.
[6] “Governor’s Message to the 31st State Legislature,” Dec. 21, 2021, p. iii.
[7] Grassroot Institute of Hawaii calculations of FY 23 windfall.”
[8] “Ibid.”
[9] Legislative budget system budget comparison worksheet,” Hawaii State Capitol, p. 1157, row V at the bottom, which shows $1,059,369,925 American Rescue Plan funds for fiscal 2022 and $286,935,756 for fiscal 2023. See also, HB200 CD1 of 2021, p.4, which shows that V stands for American Rescue Plan funds.
[10] “Report of the 2020 – 2022 Tax Review Commission,” Hawaii Department of Taxation, Dec. 20, 2021, p. 17.
[11] Most Hawaii residents want lower taxes, new survey shows.”

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