The most regressive states have little or no income tax and rely instead on property taxes and sales/excise taxes. But these bills would also eliminate individual and corporate income taxes, a swap that would make Hawaii’s tax system seriously regressive and undermine the adequacy of state revenues.Ī regressive tax system is one where lower-income households pay a greater percentage of their income in taxes than wealthier ones do. The counties can and should be moving in this direction anyway to pay for critical infrastructure and other priorities for county residents. Raising property taxes is a good tax policy, when accompanied by increased homestead exemptions. Another would require a constitutional amendment to allow the state to again be able to tax real property. One of the bills aimed at property tax increases would encourage counties to raise rates by taking away their share of the TAT. Our low property taxes are cited as one reason out-of-state investors are able to buy up Hawaii’s houses, leaving local residents with a reduced housing inventory and higher prices. Hawaii has the lowest residential property tax rates in the country and the amount homeowners pay is low even when factoring in the high cost of houses here. County governments depend on property taxes, which were expected to produce $2.2 billion in 2020, as their main source of revenue. Uniquely, Hawaii’s constitution gives counties the sole authority to tax real property while restricting them from imposing most other taxes. This year, legislators considered proposals that would fundamentally change Hawaii’s tax system by increasing property tax rates and eliminating income taxes. Raising property taxes is one way counties could realize more income. Hawaii currently has the lowest property taxes in the United States - the main source of revenue for county governments in the islands. Bills introduced in 2021 to impose taxes on sugar-sweetened beverages have the same motivations. Hawaii’s progressive tobacco taxes are intended both to help defray the public cost for smoking and to reduce consumption. That’s because sin taxes are tools to change behavior, not just collect revenues. Although alcohol tax revenues have remained pretty consistent (around $50 million per year) over the past decade, tobacco taxes ($112 million in 2020) have been on the decline. So-called “sin taxes” on tobacco products and alcohol play a minor role in state revenues, accounting for just 2% of total collections in 2020. Together these three accounted for 81% of state taxes. In 2020, our General Excise Tax produced $3.5 billion, individual income taxes amounted to $2.4 billion and the Transient Accommodations Tax added $564 million. In most years, the state operating budget (now about $16 billion) gets half its support from taxes, another 23% from special funds (e.g., UH tuition) and 20% from the federal government. None of these is possible without the collective investment - through taxes - in government spending and regulation. Local economists point to the following as the foundation for a healthy and vibrant future for Hawaii: efficient transportation, good public schools and universities, affordable and available housing and effective government. Rebuilding Hawaii as a place where local people have opportunities to live and thrive demands a review of many state policies, including the basic fairness and adequacy of our tax system. Over the past 12 months, COVID-19 has reshaped work, school, housing and our whole economy. Any sales tax that is collected belongs to the state and does not belong to the business that was transacted with.Every year, new tax proposals are introduced at the Legislature and, this session, tax policy deserves more scrutiny than ever. Sales tax, or use tax, is any tax that's imposed by the government for the purchase of goods or services in the state of Hawaii. In addition, check out your federal tax rate. Hawaii state income taxes are listed below. Income tax brackets are required state taxes in Hawaii based on relative income and earnings. The tax rates are broken down into groups called tax brackets. Income tax is a tax that is imposed on people and businesses based on the income or profits that they earned.
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