Gov. Linda Lingle today announced a package of proposals to bring tax relief to Hawaii residents struggling with the state’s high cost of living. The various proposals, submitted under the banner “Helping Those Who Need It Most,” add up to a total of $346 million in tax relief over two years. Noting that the state Constitution calls for a tax refund given the state’s two-year budget surplus, Lingle called on the Legislature to approve a $100 per person tax refund for families with incomes below $100,000 ($25 per person for those earning more). Another proposal would allow the state to adjust tax brackets every year to adjust for inflation.
Other measures in the proposed tax relief package would exempt “essential foods” (including milk, eggs, cereal, juices, and infant formula) from the state’s General Excise Tax, increase the standard deduction from $4,000 to $7,500 for married couples (or from $2,000 to $3,750 for single people), offer a $1,000 per child exemption for families earning $100,000 a year or less (or a $500 exemption for families earning $100,000 to $200,000 annually), and increase the dependent care services credit.
Hawaii drivers would also benefit under Lingle’s proposals, which include extending a general excise tax exemption for ethanol-blended gasoline that expired in December and waiving registration fees and taxes for vehicles owned by deployed members of the National Guard and Reserves.
Following are the details on the various proposals in the “Helping Those Who Need It Most” tax relief package from the Governor’s Office:
- Taxpayer Protection Act of 2007
Because Hawai‘i’s tax measures are not adjusted for inflation, taxpayers are hit with a hidden tax increase each year as inflation rises. The Administration is proposing a measure, called the “Taxpayer Protection Act of 2007,” that would require the state director of taxation to adjust the standard deduction, personal exemption and tax brackets every year in response to inflation. This would allow these measures to retain their value over time and protect Hawai‘i taxpayers from this hidden tax increase. This change would benefit 942,300 Hawai‘i taxpayers (82 percent) with savings of $10 million per year.
- Eliminate the GET on 11 Basic Foods
To offset the rising cost of food, the Governor proposes eliminating the general excise tax on certain essential foods such as milk and other dairy products, eggs, canned fish, cereal, juices, peanut butter, beans, carrots, infant formula and infant cereal. This will eliminate $55 million in taxes paid on foods during the next two years. It will benefit everyone in Hawai‘i, especially those struggling to feed their families.
“No one should be taxed for buying basic food necessities,” said the Governor.
- ‘Ohana Tax Reduction Act of 2007
To further help families meet the high cost of living, the Administration is proposing an additional $1,000 exemption for each child 18 years or younger for families with household incomes of $100,000 or less, and $500 per child for those with household incomes over $100,000 and up to $200,000. In addition to the added exemptions, under this proposal, called the “‘Ohana Tax Reduction Act of 2007,” the amount of dependent care expenses eligible for the dependent care services credit would increase from $2,400 for one dependent or $4,800 for more than one dependent to $5,000 per dependent so that families with young children or aging parents, or both, can get tax relief for taking care of their loved ones. This would include preschool, child care, adult day care, and care for disabled dependents.
This measure would provide $26 million a year in tax relief for Hawai‘i families who are faced with the responsibility of caring for young children and older parents. It would benefit an estimated 494,600 taxpayers, about 43 percent of the total.
- Biofuels Tax Exemption
The Governor is urging the Legislature to extend the general excise tax exemption on gasoline blended with ethanol, and indefinitely extend the exemption to all biofuels, including biodiesel. Hawai‘i motorists only started benefiting from the general excise tax exemption on ethanol-blended fuels in April 2006 when new administrative rules went into effect requiring at least 85 percent of motor fuel sold in the state to contain at least 10 percent ethanol. The exemption was meant to encourage the use of alternative, renewable fuels. The exemption expired on December 31, 2006, adding approximately 11 cents to every gallon of gasoline. Last year, the Lingle-Aiona Administration proposed extending the general excise tax exemption on ethanol-blended fuels, but the Legislature did not approve the Governor’s proposal.
If the extension is not approved, Hawai‘i drivers will pay an additional $32 million in taxes for the gasoline they purchase for each of the next two years.
- Constitutional Rebate
The Administration is proposing a one-time tax refund of $100 per person for families (taxpayers and dependents) with household incomes up to $100,000, and $25 per person for those earning more than $100,000. This tax refund is required under the Hawai‘i State Constitution whenever the state’s general fund balance exceeds 5 percent of general fund revenues at the end of two successive fiscal years. Under the Governor’s proposal, a family of four earning $100,000 or less would receive a $400 tax refund.
This proposed refund would return a total of $90.8 million to all 1,030,269 Hawai‘i resident taxpayers.
- Vehicle Tax and Registration Exemption
Recognizing the financial hardships soldiers and their families face while on deployment and during training throughout the year, the Lingle-Aiona Administration proposes exempting non-commercial vehicles owned by members of the National Guard and Reserves from state and county tax and registration fees. This will save $2 million in State and county fees and taxes in each of the next two years for 10,000 of Hawai‘i’s men and women in uniform.
“This is a small way to send a strong message to our troops and their families that the people of Hawai‘i appreciate their service and sacrifices,” Governor Lingle said.