Recent state tax cuts leave many struggling families behind, in need of more help
Tax credits can help round out relief efforts at low cost to the state by targeting assistance only to the families that need additional support.
HONOLULU, Hawaiʻi — It’s no secret that Hawaiʻi’s high cost of living is the driving force behind the struggle many local families face remaining in the islands with stable housing and access to adequate food and other basic needs.
In 2022, 10.2 percent of Hawaiʻi’s residents were living in poverty. Overall, 44 percent of households in Hawaiʻi were either living in poverty, or were under the Asset-Constrained, Income-Limited, Employed (ALICE) threshold. ALICE households are not technically living in poverty, but they are still struggling to make ends meet. That same year, 15,664 local residents left Hawaiʻi for other states in the U.S. as a result.
In an attempt to address this crisis, Governor Josh Green introduced in 2024, through his Green Affordability Plan, legislation aimed at providing tax relief to Hawaiʻi residents. During the course of the 2024 legislative session, the governor’s proposal was radically altered by lawmakers behind closed doors during the conference committee phase. The public was given no opportunity to weigh-in on these changes.
“While the final bill still provided tax relief, these closed-door changes shifted the bulk of the benefits up the income scale to middle- and high-income earners,” said Devin Thomas, Hawaiʻi Appleseed senior policy analyst for taxes and budget. “The result is a policy that mostly helps families that don’t need the assistance, while leaving behind the families struggling to survive with low wage jobs, and most in danger of homelessness or being priced out of Hawaiʻi.”
In 2025, the bottom 20 percent of earners will receive an average tax cut of just $335, while the top 1 percent will receive more than $6,000. By 2031, when the policy is fully phased-in, those benefits will have grown to just $440 for the bottom 20 percent, while ballooning to an average of $12,800 each year for the top 1 percent. This decision will come at a tremendous cost to the state budget as well. By 2031, it will cost the state an estimated $1.2–1.4 billion per year in foregone revenue, roughly 10 percent of the total state budget.
“The need for financial relief for low-income families is still severe, especially those with children” said Thomas. “Targeted tax credits are a proven, effective tool for delivering assistance to the families that actually need it. They can be accessed directly through tax filing, without the need for lengthy application processes. And because they are tailored in their scope, the cost to the state is much cheaper than broad, sweeping tax cuts.”
Hawaiʻi Appleseed has created a new policy brief, “Helping Hawaiʻi’s Families,” which outlines two potential strategies for using tax credits to round out the tax relief provided to moderate- and high-income households through the 2024 legislation, signed into law as Act 046 (2024).
The first option is to create a state-level Child Tax Credit (CTC) for Hawaiʻi. Proposed legislation in 2025 (HB694/SB1053) calls for a credit worth up to $650 per child. This amount would phase-out above incomes of $40,000, with an income limit of $115,000 per household. Families in the bottom 20 percent would see an average tax savings of $996 per year, and families in the next 20 percent would save an average of $1,195. This version of the CTC would cost around $83 million each year.
The second option would be to boost the existing state EITC for households that have children. In 2022, the value of the state EITC was raised from 20 percent to 40 percent of the federal EITC. Proposed legislation in 2025 (HB182/SB1013) would increase that percentage to 50 percent if the household has at least one child under the age of 18. On top of the state EITC they already receive, people who qualify for this expanded EITC would see an additional tax cut of $512 on average. This proposal would come at a cost of roughly $30 million per year.
To pay for these proposals and offset the cost to a state budget that will face increasing strain in coming years, the brief recommends fixes to the state’s capital gains and conveyance taxes.
“Time is running out to keep Hawai‘i’s struggling local families rooted here,” said Will White, Hawaiʻi Appleseed interim executive director. “As the tax cuts from Act 046 phase-in, it will become increasingly difficult to fund these and other solutions to the cost of living crisis. It’s not too late for lawmakers to take action this session. Either tax credit strategy would allow local families to better participate in consumer spending, circulating currency through the economy, delivering GET tax revenue to the state, and enhancing our shared prosperity.”
