Congress’ budget blueprint leaves Hawaiʻi’s working families behind
The fundamental role of government at all levels is to create the conditions in which its people can thrive. That role translates into public policy that protects civil and human rights, creates a clean natural environment and safe communities, and guarantees meaningful access to economic prosperity for all. It was disappointing therefore to see the U.S. House of Representatives pass a budget blueprint for $4.2 trillion in tax cuts that will go primarily to the very wealthy, accompanied by almost $2 trillion in cuts from social safety net programs, over a 10 year period.
The message this blueprint sends to the people of Hawaiʻi is that this Congress and the Trump Administration are determined to prioritize corporate welfare and tax breaks for billionaires at the expense of vital programs that help our working class communities afford the high cost of living in Hawaiʻi. In effect, the budget blueprint aims to take food out of the mouths of hungry keiki, so that billionaires can pad their pockets even more on the way to the bank.
The Budget Blueprint
A large portion of the proposed tax cuts would come from a renewal of the Tax Cuts and Jobs Act (TCJA) of 2017, which would deliver renewed tax cuts for higher income earners, along with higher estate tax exemption amounts. Renewing the TCJA would deliver a tax cut of 3 percent for the average U.S. household. The top 1 percent of households would see a tax cut of 3.6 percent on average, and households in the top 0.1 percent—the very wealthiest households—would see a tax cut of 4.6 percent on average.
Among numerous proposed reductions to federal programs, the blueprint directs the:
Energy and Commerce Committee to cut $880 billion in healthcare spending over 10 years; and the
Agriculture Committee to cut $230 billion in nutrition benefits ,
Reports published by the House Budget Committee make it quite clear that programs like Medicaid and the Supplemental Nutrition Assistance program are being targeted for the steepest reductions in spite of their position as vital safety net programs for many of the country’s most vulnerable households.
While details are still emerging, House leadership has proposed:
Implementing strict work requirements as a condition of receiving benefits; and
Shifting a larger portion of the cost of running these programs onto the states.
If enacted, these two policies would make it harder for people to recertify for coverage, likely pushing them off the rolls. States would likely be forced to pull back on the number of people they can serve as federal funds dry up.
According to Hawaiʻi Appleseed research examining Hawaiʻi’s federal funds, the state’s Medicaid program provides health coverage for almost 400,000 people, including children, people with disabilities, and low-income seniors. As the state’s single largest public program, Hawaiʻi receives $2.2 billion annually in federal funding to help pay for the program.
Meanwhile, Hawaiʻi’s Supplemental Nutrition Assistance program, which provides subsidies to purchase food, is supported by over $895 million in federal funds. A majority of those funds go directly to families who are struggling to make ends meet in a state with the highest cost of living in the country.
Reductions to these programs, or implementation of overly complex eligibility requirements, will mean people in our communities will suffer. Many will have no choice but to make hard choices on whether to pay for food or medicine.
What Hawaiʻi Can Do
The outcome of these budget negotiations is still unclear, and the final text will likely take weeks to materialize. But it’s a pretty safe bet that some kind of reduction in federal dollars flowing to Hawaiʻi is on the horizon.
The question for us then is what are we, as a community, going to do about it? What kind of Hawaiʻi do we want to live in? Do we want to live in a Hawaiʻi that cares for and protects its people, especially those of us with the least? Or do we want to live in a Hawaiʻi that pulls back when times are tough and turns a blind eye to the harm and suffering inflicted by wealthy elites on the continent?
I’d like to think we live in a caring Hawaiʻi that lives up to its reputation of being the aloha state. But hard choices are going to need to be made if Hawaiʻi is going to step up to fill the gaps left by a retreating federal government. Here are few things we can do as a state to ensure we have the resources to help us meet the moment:
Close the capital gains tax loophole. Hawaiʻi is one of only nine states that taxes investment income at a lower rate than it taxes most income from wages. In Hawaiʻi, the tax rate for long-term capital gains is 7.25 percent, or the taxpayer’s marginal income tax rate, whichever is lower. This maximum 7.25 percent rate is considerably less than the top marginal income tax rate of 11 percent imposed on high income taxpayers—the same group of taxpayers that earn the vast majority of the long-term capital gains income across the state.
In Hawaiʻi, almost 80 percent of income from capital gains goes to people earning over $400,000 a year. We should close this loophole and tax capital gains at the same marginal rates as regular income from work. Doing so would raise millions in revenue for needed state services while reducing inequity within the tax code.
Raise the tax on mansions. Hawaiʻi’s conveyance tax levies a one-time tax on the sale of homes in the state and levies a higher rate on non-owner occupied investment properties. Non-resident buyers are almost exclusively purchasing high-value real estate, the prices for which are over $2 million or more. We should reform this tax to shift the burden away from local sellers and onto wealthy non-residents who contribute little to our economy or tax base.
Raising the conveyance tax on high value real estate and second homes would generate millions of dollars in new revenue that would go directly to funding investments in affordable housing and associated infrastructure. This is essential if we are to create a housing market that works for local families, allowing them to stay here, work here, and thrive here.
Invest in tax credits for working families. Refundable tax credits like the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) are among the most successful federal anti-poverty programs we have at our disposal. These credits provide extra cash assistance to households who are working, but still can’t make ends meet.
Hawaiʻi has a state level EITC that provides a percentage match of the federal credit, helping thousands of local families afford their basic needs. The percentage match could be expanded further to provide additional support to highly vulnerable families.
Hawaiʻi should also invest in a state level Child Tax Credit—targeted to low and middle income working families—to help parents afford the high cost of raising a family in Hawaiʻi.
Together, these interventions will help us close some of the gaps left by the federal government and support our community through what looks like a difficult time for many. However, if we are going to create an economy that works for working families, and not just the wealthy, these actions will have to be just the first steps toward a larger transformation.
What kind of Hawaiʻi do you want to live in? For me, the answer is a Hawaiʻi in which we work side by side to ensure that no one among us suffers from lack of resources; and where everyone has opportunities to achieve genuine economic security and fulfill their potential.
