Governor’s Tax Plan Deserves Credit, But Not For Its Credits 

by Keli’i Akina

Gov. Josh Green made waves with some of the bold proposals he offered during his first State of the State address in January.

One of his biggest initiatives — dubbed the Green Affordability Plan — aims to give Hawaii residents more than $300 million in tax relief. The best part of the governor’s affordability plan was his proposal to increase the personal exemption and standard deduction amounts for the state’s personal income tax, as well as index Hawaii’s multiple income tax rate brackets to inflation. Although not a cut in tax rates, these are much welcomed, and it would be a shame if the Legislature does not follow through.

Increasing the personal exemption and standard deductions would give families more money in their weekly paychecks. No waiting or paperwork. Just immediate relief from Hawaii’s high cost of living. And tying Hawaii’s income tax brackets to inflation? That’s also a great idea that could save Hawaii taxpayers millions of dollars, if approved by the Legislature. No longer would Hawaii residents be pushed into higher tax brackets simply because their employers gave them a cost-of-living adjustment to cope with inflation.

Less welcome was the governor’s call for a variety of tax credits, including for food, rent and childcare expenses. He also called for an increase in the state’s earned income tax credit (EITC) and a tax credit for teachers who spend their own money buying classroom supplies.

These are all well-intentioned ideas, but rather than provide immediate financial relief at the cash register — the point of purchase — they would put taxpayer money in a government coffer before giving it back a year later.

Then, of course, there’s the matter of filing all the paperwork. In case you haven’t noticed, tax credits can be complicated. The EITC form is 38 pages long, and the tax credit just for renters contains several dizzying stipulations and requirements.

Perhaps that’s why many people simply don’t file to claim them. They might be eligible, but all the questionnaires and paperwork make it hard to tell. There’s also the concern that complicated tax credits make it easier for people to make mistakes or cheat, which can result in too much money going to the wrong people and not enough going to those who are truly eligible.

That’s why I always urge lawmakers to simply just cut taxes. It’s the easiest and most straightforward way to give hardworking families relief. Instead of waiting until tax season to fill out a mountain of paperwork, residents would see immediate relief at the cash register, their point of purchase.

Lawmakers would do well to enact Gov. Green’s proposed increases in the personal exemption and standard deduction amounts for the income tax, plus his idea to index the income tax brackets to inflation.

The proposed tax credits? Again, I would rather our elected officials simply lower tax rates. Tax credits are good, but tax cuts are better.

KELI’I AKINA is president and CEO of the Grassroot Institute of Hawaii.

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