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Historic tax cut brings welcome relief to Hawaii

Grassroot CEO Keli‘i Akina and Gov. Josh Green waved shaka signs at the bill-signing. Photo by Tom Yamachika.

The following is a news release that was issued June 3, 2024, by the Grassroot Institute of Hawaii.
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The Grassroot Institute was in the forefront of efforts to lower the state income tax and exempt private-practice doctors and dentists from the GET for some medical services

 

HONOLULU, June 3, 2024 >> The Grassroot Institute of Hawaii commends Gov. Josh Green‘s decision to sign today two bills that will provide Hawaii taxpayers generous tax relief.

“Hawaii taxpayers have long been subject to some of the highest taxes in the country,” said Keli‘i Akina, Grassroot president and CEO, in attendance at the bill’s signing. “For too long, our family and friends have been leaving our beloved islands because of our high cost of living, so I commend the Legislature and Gov. Green for working together to provide what has been rightly called historic tax relief that will lower Hawaii’s high cost of living, generate economic growth and help counter the exodus of Hawaii residents to the mainland.”

Akina said HB2404 will incrementally provide Hawaii taxpayers with the biggest income tax cut in state history by increasing the value of the standard deduction and increasing the sizes of the state’s 12 tax brackets.

SB1035, he said, will exempt private-practice Hawaii doctors and dentists from having to pay the state general excise tax on payments made to them for services rendered to patients covered by Medicare, Medicaid and TRICARE, starting in 2026.

Grassroot was at the forefront of supporting both bills throughout the 2024 legislative session. Its testimonies and commentaries on HB2404 can be found here, and on SB1035 here.

Akina said that with the enactment of the state income tax cut, a family of four in Hawaii making $90,000 a year could see its income taxes go down by 30% in 2025, then continue to decrease by almost 70% by 2031. All told, Hawaii taxpayers will save $5 billion over the course of the next six years, according to an estimate from the Department of Taxation.

“It’s incredible that Hawaii residents in the lowest tier of earners will go from having the second-highest state income-tax burden in the nation to the lowest, and average working families will see their state income tax burden drop from second highest to the third lowest,” Akina said. “The impacts of this brave move approved unanimously by our state leaders will be enormous.”

High taxes, he said, have always been among the top reasons people have been leaving Hawaii, as demonstrated in Grassroot’s “Why we left Hawaii” series, in which people moving away shared their stories of why they made that decision.

About the new GET exemption, Akina noted that “Hawaii was the last state to apply an excise or sales tax to medical services, so creating an exemption for Medicare, Medicaid and TRICARE brings Hawaii more in alignment with the rest of the nation.”

SB1035, he said, “will make it more feasible for physicians and dentists to continue practicing in the state while also improving healthcare access for all Hawaii residents, especially in Hawaii’s rural areas.”

Malia Hill, Grassroot policy director, said the exemption will help reduce the state’s doctor shortage.

Hill, author of Grassroot’s 2023 report titled “The case for exempting medical services from Hawaii’s general excise tax,” said Hawaii has a shortage of more than 700 physicians, and that “providing this targeted tax break will help stem the tide of physicians leaving or retiring, and might even improve Hawaii’s ability to recruit new doctors.”

The Grassroot Institute has long called for the GET exemption for medical services in Hawaii. It also published a report analyzing the effects of the tax in 2020, hosted events focused on Hawaii’s healthcare woes, and in 2023 circulated a petition to lawmakers with the signatures of more than 7,500 Hawaii residents in favor of the tax exemption.

For more information or to arrange an interview with Akina or Hill, please email Mark Coleman at Mark.Coleman@grassrootinstitute.org or call 808-386-9047.

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