Hawaiʻi’s families need urgent help to deal with the high cost of living. This is especially true for parents, who have to balance the cost of child care, rent, and food every month. 

There is a simple solution to this problem with a proven track record of helping families cover their basic needs: the state can invest more money into lifting up struggling families through tax credits. 

Tax credits can put money back in families’ pockets, and unlike many government programs, these credits do not require people to submit lengthy applications, attend interviews, or gather unnecessary paperwork. If someone qualifies for a tax credit, they can claim it on their tax return and quickly receive the money they are owed.

In 2021 during the pandemic recession, the federal Child Tax Credit (CTC) was boosted to help families across the U.S.. The expansion of the credit lifted 2.9 million children out of poverty. Unfortunately, this expansion ended after 2021, and child poverty rates have climbed since then. Hawaiʻi lawmakers could fill the gap left by the expiration of the expanded federal CTC through two primary tax credit tools.

1. Creating a Child Tax Credit for Hawaiʻi

Hawaiʻi could follow in the steps of other states, like California, Oregon, and New York, by creating its own CTC for low- to middle-income parents.

House Bill 694 and Senate Bill 1053 would create a CTC worth up to $650 for each child, with the amount slowly decreasing over incomes of $40,000 or more. This credit has the potential to reach 176,000 children throughout the state, helping their families cover basic needs like food and pay for bills. Doing so would cost the state just $83 million each year.

2. Expanding the state Earned Income Tax Credit

Hawaiʻi already has a state Earned Income Tax Credit (EITC) that provides a 40 percent match of the federal EITC. House Bill 183 and Senate Bill 1013 would raise the state EITC to 50 percent of the federal EITC if there are children under the age of 18 in the household. This would cost $30 million each year.

Data shows that both the CTC and the expanded EITC would provide a significant boost to working families with children. The credits would target the low- to middle-income population, providing a needed boost to the economic security of local families. Of the two proposals, the CTC is more robust.

Figure 1. Average Amount by Income Group for CTC and EITC Expansion, Hawaiʻi (2025)

Both proposals could be paid for by raising taxes on a small number of wealthy taxpayers.

1. Closing the capital gains loophole 

Hawaiʻi can better support low-income working families by changing how it taxes income from investments, called “capital gains.” In Hawaiʻi, capital gains are taxed at a lower rate (7.25 percent) than regular income (up to 11 percent for the highest earners). Since capital gains are primarily owned by the wealthy, this is a glaring loophole for the rich. 

Taxing capital gains at the same progressive rates as regular income could bring in at least $79 million each year. This extra money could be used to fund programs and tax credits that help families deal with the high cost of living.

2. Increasing the conveyance tax on expensive properties 

Hawaiʻi’s conveyance tax is a fee paid when real estate is sold or transferred. The amount of the tax depends on the property’s sale price and whether it will be used as a primary residence. More expensive properties and non-owner-occupied transactions incur a higher tax rate upon their sale. Some of the revenue from this tax goes to the general fund, while other portions of it are directed to land conservation and affordable housing. The tax has not been updated in many years, despite rising real estate prices. Updating the tax could bring in additional revenue targeted primarily at wealthy and out-of-state owners.