Tax Cuts Would Be The Ideal Holiday Gift This Year
by Keli‘i Akina
Christmas and New Year’s are right around the corner. But not everything is brimming with holiday cheer.
Hawaii’s high cost of living, the nation’s record inflation and fears of a recession threaten to not only alter holiday plans but disrupt life in Hawaii for years to come. Probably even Santa is wondering if he can afford to feed his reindeer for his Christmas Eve trek around the world.
It seems like America’s economy has everyone on the naughty list.
But there is a silver lining: Hawaii has a state budget surplus of about $2 billion that is projected to grow to about $10 billion over the next four years. It also has $800 million in its emergency reserve, or “rainy day” fund.
This means the state is in a prime position to give Hawaii residents a big holiday bonus in the form of tax relief.
Granted, some are worried that a recession might make a dent in those rosy numbers. When the economy crashes — like it did during the COVID-19 lockdowns — the state tends to collect fewer tax dollars, since people spend less and fewer tourists visit the isles.
However, these latest budget projections are based on an estimate from the Council on Revenues, which took into account a possible recession.
So, unless the Legislature squanders our surplus by going on a massive spending spree, it’s still an excellent time for our returning and newly elected state legislators to provide tax relief and give Hawaii’s residents a well-deserved break.
One good place to start would be to exempt medical services from the state general excise tax. Not only would it help lower our healthcare costs, it would also help address Hawaii’s shortage of medical professionals.
Yes, a GET exemption for medical services would reduce state tax revenues by about $200 million a year. But considering the size of the state’s budget surplus, lawmakers could cut taxes even more and still come out ahead.
Another idea would be to lower the GET rate in general. Reducing the rate by just 1 percentage point — from 4% to 3% — would put $1 billion dollars back into the economy and have the bonus effect of benefiting low-income earners who shell out a higher proportion of their income on the tax.
Especially if there is a recession in the near future, lower taxes on necessities such as food, housing and healthcare would be ideal.
Legislators could also look at trimming our income tax rates, which are the second highest in the country. They also could authorize tax rebates like they did this year.
The point is, lawmakers are not lacking ways to put money back into the pockets of Hawaii taxpayers. All that is needed is a little creative thinking — and empathy for Hawaii’s struggling families.
Keeping in mind the state’s budget surplus, state lawmakers should work more seriously to lower Hawaii’s exorbitant cost of living by cutting our taxes, trimming costly regulations and reducing barriers to housing.
If you would like to give our legislators a little encouragement, you can sign and share the Grassroot Institute of Hawaii’s petition asking for a GET exemption for medical services — if you haven’t already. You can find the petition at www.grassrootinstitute.org/get.
What a wonderful holiday gift it would be for our state lawmakers to prioritize tax cuts and regulatory reform in the upcoming 2023 legislative session.
KELI‘I AKINA is president and CEO of the Grassroot Institute of Hawaii.