(The Center Square) – Hawaii has faced an affordability crisis for years, according to Gov. Josh Green, who outlined how he wants to address the issue in his policy brief.
The first phase of the Green Affordability Plan, also known as GAP, increased the refundable amount from the federal Earned Income Tax Credit and increased eligibility for the food tax credit.
The governor is proposing a change to the state’s income tax plan that would index it for inflation.
“Hawaii is one of the only states in the country that does not index income brackets with inflation” Green said in the brief. “This means that households are subjected to an implicit tax increase due to inflation. The present system requires that households pay more in individual income taxes even though the purchasing power remains the same—or even declines.”
This is good news for taxpayers in Hawaii which has one of the highest income tax rates in the country, according to Jonathan Helton policy researcher for the Grassroot Institute, a nonpartisan research organization.
“If you look at what the median income is in every state and then look at what tax bracket that family would fall into, in Hawaii, someone making the median income pays the second highest amount of income taxes of anywhere in the U.S,” Helton said. “And that’s only behind Oregon which is a state that doesn’t have a sales tax.”
Housing costs and supply are another hurdle in attracting residents to the Aloha State and getting them to stay.
“In 2023, Hawaii lost an additional 4,000 residents, bringing the net loss to a total of 22,000 residents since 2019. — people who lived, worked, and contributed to the Hawai‘i’s economy and society,” Green said in his brief. “The exodus corresponds to a dark milestone in Hawaii’s history for the state’s indigenous people. For the first time since a government census was conducted in 1850 under King Kamehameha III, a majority of the world’s Native Hawaiian population lives outside the Hawaiian Islands.”
Two bill currently in the legislature could alleviate some of the problems. House Bill 2090 would make it easier to construct residential units in commercial areas. The bill is currently in the Senate after passing the House of Representatives last month.
House Bill 1630 would prohibit counties from not allowing more than two units per lot. It is also in the Senate after passing the House.
Green’s plan to add a $25 tax on transient accommodations for a newly-created Climate Health and Environmental Action Special Fund could affect tourism providers, Helton said. House Bill 2406 passed the House earlier this month is in the Senate.
“Tourism is Hawaii’s number on GDP (gross domestic product) creator,” Helton said. “And if you continually increase the tax burden on tourism providers, eventually that’s going to affect people’s ability to come to Hawaii and to spend money in other places, your local restaurants, your local vendors who are selling merchandise, your tour operators.”
