New budget and policy resource comes at a critical time for Hawaiʻi

HONOLULU, Hawaiʻi — The State of Hawaiʻi has a new resource to help make better budget and tax policy decisions. It’s come online at a critical time in light of recent ongoing events in Washington, D.C. According to recent federal government reports, 2018 federal tax reforms have resulted in a 33 percent drop in receipts from corporate taxes and an annual budget deficit that is growing faster than expected, now anticipated to exceed $1 trillion by 2019. Reduced revenues increase the risk of program cuts when the current federal spending bill expires at the end of September.

Uncertainty regarding federal funding, which accounts for 17 percent of Hawaiʻi’s $17 billion executive budget, makes it more important than ever that Hawaiʻi has the ability to make data-driven decisions on state tax and budget policy to ensure the choices we make are efficient, effective, and equitable. To that end, the new Hawaiʻi Budget and Policy Center (HBPC) has released its first publication, a state budget primer that serves as an entry-level course covering the components of the state and county budgets, how the budget is created, and the priorities and choices it reflects.

Hawaiʻi’s budget is a powerful foundation for daily life and a demonstration of our state’s priorities and values. It sets out from where we get our money, as well as on what—and on who—we spend it. The budget dictates the investments we make in our schools, our environment, our health and our economy. It is the blueprint for Hawaiʻi’s current and future prosperity and is an economic engine in and of itself, comprising 20 percent of the state’s gross domestic product.

While federal budget decisions may be made outside of our control and preferences, we can craft state and county budgets that align with Hawaiʻi’s values and aloha spirit. The HBPC budget primer serves as a starting point for a new effort to pull together data and information relating to the budget so policy makers, community leaders, and interested citizens can make better informed budget and policy decisions.

Takeaways from the budget primer include the following:

• Hawaiʻi is last in the nation in terms of percentage of our state budget that comes from federal sources, suggesting that Hawaiʻi may have an opportunity to attract more federal dollars to support state programs.

• State government spending accounts for 20 percent of the gross state product (GSP). In combination with county budgets, 26 percent of the GSP comes from government-based spending.

• Hawaiʻi residents with the lowest incomes pay almost twice as much of their earnings to state taxes than people with the highest incomes.

• The state’s biggest source of tax revenue is the general excise tax (GET). The GET appears to be deceptively modest (4 to 4.5 percent) if seen as a sales tax. However, because it’s an excise tax applied to virtually every transaction, the multiplied effect would equal an actual sales tax of between 10–11 percent.

• Hawaiʻi’s property taxes, which are collected at the county level only, are set at the lowest rates in the country.

The nonpartisan Hawaiʻi Budget & Policy Center is a State Priority Partner, a project of Hawaiʻi Appleseed, and is affiliated nationally with the Center on Budget & Policy Priorities. HBPC focuses on economic opportunity for all Hawaiʻi residents, especially low- to middle-income families struggling to make ends meet. Its work addresses budget and policy issues, conducting trustworthy unbiased research and identifying strategies to improve economic fairness and opportunity.