Tax changes mean little to low earners
The Legislature has enacted a bill that raises the standard deduction for income taxes and adjusts the tax brackets.
HAWAII'S income taxes on the working poor became the highest in the country last month when the Alabama legislature reformed its tax code. Reductions enacted this week
by the Hawaii Legislature will remove the islands from that embarrassing distinction -- but not by much. Low wage earners will continue to carry a cruel burden when paying next year's tax bill.
The Hawaii bill will raise the standard deduction from $1,900 to $4,000 for couples and from $950 to $2,000 for individuals. It also will change the tax brackets by raising the taxable income thresholds for each rate.
The result is a $50 million tax cut, but only 20 percent of the benefits will go to the poorest 40 percent of Hawaii residents, according to the Washington-based Center on Budget and Policy Priorities. The other 80 percent will go to families with incomes of more than $31,000. The center's findings are summarized in a column on the Commentary page.
Following the Alabama action, the center reported that Hawaii would have the most burdensome income tax for one-parent families of three and two-parent families of four at the poverty level. The bill awaiting Governor Lingle's signature will move Hawaii to second and fifth worst in those categories, said Jason Levitis, the center's policy analyst.
The Alabama legislation also raised the standard deduction, but it is targeted at low wage earners, and it also provided a child tax credit for low-income families. No such provision to help low-income families with children was included in Hawaii's bill. Hawaii lawmakers also rejected earned income tax credits, similar to federal credits, for working-poor families.
Lingle said in her State of the State address that "the bottom line is that we are collecting income taxes from people who simply can't afford to pay them." That will not change next year.
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