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HB2779 would increase state’s standard deduction, decrease Hawaii tax burden

The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the House Committee on Finance on Feb. 27, 2024.
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Feb 27, 2024, 10 a.m.
Hawaii State Capitol
Conference Room 308 and Videoconference

To: House Committee on Finance
      Rep. Kyle T. Yamashita, Chair
      Rep. Lisa Kitagawa, Vice-Chair

From: Grassroot Institute of Hawaii
           Ted Kefalas, Director of Strategic Campaigns

RE: TESTIMONY SUPPORTING HB2779 — RELATING TO TAXATION

Aloha Chair Yamashita, Vice-Chair Kitagawa and Committee Members,

The Grassroot Institute of Hawaii would like to offer its support for HB2779, which would gradually increase Hawaii’s personal income tax standard deduction between tax years 2024 and 2031. For example, for individuals, the deduction would increase from $2,200 to $12,000 over the seven-year period. For individuals filing jointly, the deduction would increase from $4,400 to $24,000.

Boosting the value of the standard deduction would provide much-needed tax relief for Hawaii residents, especially those with lower and middle incomes. It also would bring Hawaii in line with most other states that offer standard deductions. Currently, Hawaii’s deductions are on the lower end in terms of dollar value.[1]

Hawaii’s high tax rates and compressed brackets don’t help. A review from the state Department of Taxation found that a Hawaii household making the median income of $88,005 pays $5,086 in income taxes each year.

This makes Hawaii the second highest-taxed state in terms of what a household earning the median income must pay in income taxes — behind only Oregon, which has no sales tax.[2]

Further, Hawaii’s high tax burden contributes to the state’s cost of living, which is a key factor in driving Hawaii residents to the mainland.

Tens of thousands of Hawaii residents have moved to the mainland over the past six years[3] — and mainly to states without income taxes, such as Washington, Nevada, Texas and Florida.[4] Their departure from the islands is not only emotionally distressing, but economically depressing as well.

Research shows that lowering income taxes — as this bill would do, though indirectly — has a number of benefits. The national Tax Foundation compiled a list of studies finding that income taxes tend to lower gross domestic product, decrease unemployment and increase wages.[5]

Please pass HB2779 to provide much-needed tax relief.

Thank you for the opportunity to testify.

Ted Kefalas
Director of Strategic Campaigns
Grassroot Institute of Hawaii
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[1] Andrey Yushkov, “State Individual Income Tax Rates and Brackets, 2024,” Tax Foundation, Feb. 20, 2024.
[2] Seth Colby, “Comparing Hawaii’s Income Tax Burden to Other States,” Hawaii Department of Taxation, June 2023. It is worth pointing out that Hawaii’s education system is funded at the state level, without county property taxes. This comparison must be understood in that context.
[3] Maria Wood, “Where People from Hawaii Are Moving to the Most,” 24/7 Wall Street, Jan. 23, 2022.
[4] Katherine Loughead, “How Do Taxes Affect Interstate Migration?” Tax Foundation, Oct. 11, 2022.
[5] Timothy Vermeer, “The Impact of Individual Income Tax Changes on Economic Growth,” Tax Foundation, June 14, 2022.

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