Hawaii Legislature Should Improve Earned Income Tax Credit


April 21, 2022

Charles is a single father living in the Kalihi Valley and raising a 14 and 11 year old on his own. The family lives in a very small studio which they can afford because Charles works for the landlord in exchange for a rent reduction.

Every year, at tax time, Charles knows he is entitled to tax credits that allow him to get a little extra money to buy basic necessities for his children. But as the cost of living continues to rise in Hawaii, he and many other working parents like him need more help, so they can keep body and soul together.

St. Elizabeth’s Episcopal Church evangelism to the community of Palama puts us in touch with so many families like Charles and his children. During the pandemic, we have seen their need for help skyrocket. And now those same families are grappling with ever-rising prices, in what is already the most expensive state to live in.

For the working poor, the basics like a roof over their heads and enough food to eat are a daily struggle. While the Legislature’s proposal for a one-time bonus this year is welcome, families like Charles’s also need help they can count on year after year.

This is where the earned income tax credit comes in. It’s a simple idea that helps low-to-middle income workers, especially single parents, keep more of what they earn. Credit increases for those with children – and who doesn’t want to help alleviate poverty among our keiki?

The state EITC has given a boost to tens of thousands of working families in Hawaii since 2018. But if our legislature doesn’t renew it this session, it will expire at the end of the year. This would mean taking away the financial assistance that many working poor rely on.

Our legislators also have the opportunity to improve the EITC. Hawaii’s EITC is currently designed so that lower-income workers cannot get the full amount of credit to which they are entitled. This session our Legislature can and should change to bring more relief to families who need it most.

Culture of Aloha

The federal EITC already allows these families to get their full credit, in the form of a tax refund. In fact, of the 31 states that have an EITC, Hawaii is one of only five that does not allow filers to get their credit as a tax refund. It’s time to bring Hawaii’s EITC in line with the federal version and most other states by making it refundable.

More broadly, the EITC is a boon to the local economy as low-income people generally spend all their money locally to meet basic needs. If this session is improved, tens of thousands of low-to-middle income families will get tax refunds through the EITC, allowing money that would otherwise go to paying taxes to buy instead. food, rent and gas.

In other words, making the EITC publicly reimbursable is as good for business as it is for the working poor, and business should let our lawmakers and the Governor know they welcome it. In addition, improving the EITC would help eliminate racial inequalities. Currently, native Hawaiian and Pacific Island filers get more from the EITC than the state average, and they would likewise see the biggest boost by making it refundable.

It’s time to better align the Hawaii EITC with the culture of aloha.

We all agree that self-sufficiency is better than just depending on aid. The EITC is a great incentive to stay employed because with credit, more of what is earned is kept by the worker. And there is almost no bureaucracy, because this tax credit is paid to workers as part of their annual tax return.

It’s time to better align EITC Hawaii with the culture of aloha and being pono, core values ​​that make us who we are. Extending the state’s EITC and making it refundable will make it a little less painful for many people to survive paycheck after paycheck and prevent them from joining the ranks of the homeless.

Honolulu Civil Beat is dedicated to building a body of informed citizens, all striving to make Hawaii a better place to live. We achieve this through investigative and surveillance journalism, in-depth corporate reporting, analysis and commentary that gives readers a comprehensive view of issues important to our community.

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