Legislators consider extending income tax credit for struggling families

If you have children and your household earns less than $57,000 a year, you could qualify for the federal earned income tax credit. Low- to moderate-income households have taken advantage of this credit since 1975.

In 2017, Hawaiʻi joined 29 other states in creating a similar tax break for working families and individuals. Advocates say these credits have been proven to help those working a lot, but not making enough.

“The federal earned income tax credit can provide $1,000 or more to low-income working families,” said Gavin Thornton, executive director of the Hawaiʻi Appleseed Center for Law & Economic Justice. “The state credit provides 20 percent of that. So a few hundred dollars to households, which is significant for a lot of folks, that means the ability to pay utilities, pay a big chunk of their rent.”

The earned income tax credit—or EITC—also has a ripple effect for working households.

“There are a number of research studies linking receipt of the EITC to positive health outcomes, the positive educational outcomes, and also positive economic outcomes,” said Will White, executive director of the Hawaiʻi Budget & Policy Center.

According to a report from the center, every dollar a tax filer gets from the credit generates another $1.24 in economic activity. White says this type of tax refund can act as an economic stimulus for the state.

“Unfortunately, the workers with the lowest incomes just aren't able to save. Once that money comes in, it's going right back out,” he said. “It's going right back out to pay the rent. It's going right back out to buy clothes for their kids. It's going right back out to put food on the table.”

However, the state's earned income tax credit will sunset at the end of this year.