The plan involves compensating for the revenue loss through slight increases in several taxes, including a minimal 0.15% rise in the general excise tax, which is expected to have minimal effect on daily resident expenses and transfer some tax burden to non-residents. The transient accommodations tax would increase by 0.50%, pushing some of the tax obligations onto tourists rather than local residents. Furthermore, an adjustment to liquor and cigarette taxes, which have not been modified in over ten years, is also considered to bolster state revenues without impacting Hawaii's residents harshly.
HB1141 proposes a revision of the state's individual income tax structure aimed at providing relief to low- and moderate-income households in Hawaii. The bill seeks to repeal the individual income tax for single filers and heads of household making less than $20,000 annually, and for joint filers earning up to $40,000. It also aims to gradually scale down tax rates for incomes up to $75,000. By leveraging 2016 revenue data, the legislators believe that this change will only reduce revenue by $198 million while concurrently contributing more disposable income to these residents' paychecks.
Debate surrounding HB1141 is likely to arise primarily from its approach to accessing necessary state revenue while providing tax relief. Supporters could argue that the bill adequately addresses the financial challenges faced by low-income families by alleviating their tax burdens and reassigning that financial responsibility to sources less impactful on residents, such as tourists. Conversely, critics may express concerns over the reliability of tax revenue stemming from visitor expenses, fearing that this strategy might simply postpone the inevitable need for a more sustainable revenue source in the state budget.