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Monday, June 3, 2024
"Historic tax relief that will lower Hawaii’s high cost of living"
By Grassroot Institute @ 4:26 PM :: 2627 Views :: Health Care, Taxes

Green signs income tax breaks

by Kim Jarrett, The Center Square, June 3, 2024

Hawaii Gov. Josh Green signed House Bill 2404 into law on Monday. The bill increases the standard income tax deduction in odd years and lowers tax rates for all brackets in even years.

The governor said the change would lead to a 71% decrease in the income tax rate by 2031, which would increase take-home pay by $3,613 for a family of four that makes $88,000.

“This legislation is a historic step toward addressing the financial challenges and the cost-of-living crisis faced by Hawaii’s working families,” Green said. “By doubling the standard deduction and amending the tax brackets, HB 2404 provides much-needed tax relief to our residents.”

Hawaii is the second highest-taxed state and will become the fourth-highest with the change, according to Green's office.

Green also signed Senate Bill 1035, which exempts some medical services from the state's general excise tax.

“This law is a significant step toward relieving financial burdens and stimulating economic growth in our healthcare sector,” Green said. “By exempting healthcare and dental services reimbursed from these critical programs from the GET, we will promote increased equity and access to healthcare and strengthen our healthcare infrastructure. As a former ER physician working in a rural community, I can confidently say that this legislation will be especially beneficial for rural healthcare providers and patients.”

Keli'i Akina, president and CEO of the Grassroot Institute of Hawaii, said despite criticism by some who said the state could not afford the tax breaks, he believes the state "cannot afford to not cut taxes."

"For years, Hawaii’s governments have been stuck in a spiral of high spending and high taxes — the result being a stagnant economy and a state we can’t afford to live in," Akina said in a letter to subscribers. "Hawaii’s high cost of living is being driven even higher by inflation, and people are leaving the state for better opportunities as many of Hawaii’s beloved local businesses are closing their doors."

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Grassroot lauds signing of bills to lower state income tax, provide GET exemption for some medical care

News Release from Grassroot Institute June 3, 2024

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.

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GOVERNOR GREEN SIGNS LARGEST INCOME TAX CUT BILL FOR WORKING FAMILIES AND BILL TO EXEMPT CERTAIN MEDICAL SERVICES FROM THE GENERAL EXCISE TAX

News Release from Office of the Governor, June 3, 2024

HONOLULU, HI – Governor Josh Green, M.D., today signed two major pieces of legislation, House Bill (HB) 2404 and Senate Bill (SB) 1035, into law. HB 2404 provides significant tax relief to Hawaiʻi’s working families. The largest income tax cut for working families in the state’s history, HB 2404 makes the tax code more progressive. SB 1035, exempts medical services reimbursed by Medicare, Medicaid, and TRICARE from the state’s General Excise Tax (GET). 

HB 2404 amends two key components of Hawai‘i’s tax code over a seven-year period. In odd years, the legislation increases the standard deduction, which benefits low- and medium-income households. In even years, the legislation amends the tax brackets by eliminating the lowest brackets and lowering the tax rates for all brackets. As a result of these changes, the state income taxes paid by working class families will fall by 71 percent by 2031.

For example, a family of four making the median household income of $88,000 will see its take-home pay increase by $3,613 by 2031. Under current tax law, this family would owe $5,086 in state taxes. After implementing the tax law changes, the family would owe $1,479. A take-home pay calculator built by the Hawaiʻi Department of Taxation to determine income tax reduction impacts for both individuals and their families under HB 2404 can be downloaded here

“This legislation is a historic step toward addressing the financial challenges and the cost-of-living crisis faced by Hawaiʻi’s working families,” said Governor Green. “By doubling the standard deduction and amending the tax brackets, HB 2404 provides much-needed tax relief to our residents.”

The changes to the income tax law reduce the tax liability of lower-income taxpayers more than higher-income taxpayers, increasing the tax system’s progressivity. Many taxpayers will now see their income tax liabilities transform into tax refunds from the state due to targeted income-based tax credits.

The legislation will help Hawai‘i transition from being the second highest-taxed state for working families to the fourth-lowest. 

In addition to the historic tax reform, Governor Green also signed into law SB 1035, which exempts certain medical services from the GET. This legislation will provide relief to the healthcare system in Hawaiʻi by specifically exempting hospitals, infirmaries, medical clinics, health care facilities, pharmacies, and medical and dental providers from the GET on goods or services that are reimbursed through Medicaid, Medicare, or TRICARE. 

“This law is a significant step toward relieving financial burdens and stimulating economic growth in our healthcare sector,” said Governor Green. “By exempting healthcare and dental services reimbursed from these critical programs from the GET, we will promote increased equity and access to healthcare and strengthen our healthcare infrastructure. As a former ER physician working in a rural community, I can confidently say that this legislation will be especially beneficial for rural healthcare providers and patients.”

SB 1035 received endorsement from more than 155 healthcare professionals and is seen as a potential solution to the state’s shortage of nearly 800 physicians. A recent survey of physicians by the John A. Burns School of Medicine found that elimination of the GET on medical services could be an effective means of recruiting and maintaining more physicians. “SB 1035 is a testament to our commitment to improving healthcare access and quality in Hawaiʻi,” said Governor Green.

Photos from today’s ceremony, courtesy of the Office of the Governor, will be uploaded here.

A PDF of the slide deck can be viewed here.

Video of the event can be viewed here.

A tax impact calculator to determine individual and family take-home pay impacts under HB 2404 can be downloaded here.

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CB: Gov. Josh Green Gives Final Approval To Income Tax Break He Hopes Will Make Hawaii Affordable

HNN: Governor approves ‘historic’ tax relief for working families in bid to address high cost of living (hawaiinewsnow.com)

KHON: Gov. Green enacts historic tax relief for working class (khon2.com) 

SA: Sweeping Hawaii income tax relief becomes law

HTH: Gov. Green signs measures aimed at lowering cost of living, increasing access to medical care 

VW: Historic Tax Relief From Hawaii: Gov Signs Two Bills Into Law (valuewalk.com)

NR: Gov. Green Signs Largest Income Tax Cut Bill for Working Families and Bill to Exempt Certain Medical Services from the General Excise Tax (hawaii.gov)

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