STAND. COM. REP. NO. 353-22

Honolulu, Hawaii

, 2022

RE: H.B. No. 2406

Honorable Scott K. Saiki

Speaker, House of Representatives

Thirty-First State Legislature

Regular Session of 2022

State of Hawaii

Sir:

Your Committee on Economic Development, to which was referred H.B. No. 2406 entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

The purpose of this measure is to amend the Earned Income Tax Credit by:

(1) Making it refundable and permanent; and

(2) Allowing tax credits claimed for certain taxable years that exceed tax liability for the original claim year to be credited against the net tax liability in subsequent years, until exhausted.

Your Committee received testimony in support of this measure from the Hawaii State Teachers Association, Hawai‘i Appleseed Center for Law and Economic Justice, Hawai‘i Alliance for Community-Based Economic Development, Catholic Charities Hawai‘i, Hawaii Children's Action Network Speaks!, Imua Alliance, Democratic Party of Hawai‘i Education Caucus, Pono Hawai‘i Initiative, Hawai‘i Association of School Psychologists, Hawaii Chapter of the American Academy of Pediatrics, Chamber of Commerce Hawaii, Parents And Children Together, Aloha United Way, Hawai‘i Public Health Institute, and nine individuals. Your Committee received comments on this measure from the Department of Taxation, Department of Budget and Finance, and Tax Foundation of Hawaii.

Your Committee finds that in 2017 Hawaii enacted its own Earned Income Tax Credit. However, unlike many other states and the federal government, Hawaii's Earned Income Tax Credit is non-refundable, meaning households can only use the state credit to reduce their tax liability. This hurts low-income households because they are not able to make full use of the tax credit as they often have little to no tax liability. Your Committee believes that making the Earned Income Tax Credit refundable will provide a pathway to economic stability for Hawaii's working families. This measure would relieve financial pressure that working families face every day as the State's cost of living continues to rise and wages remain stagnant.

As affirmed by the record of votes of the members of your Committee on Economic Development that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 2406 and recommends that it pass Second Reading and be referred to your Committee on Finance.

Respectfully submitted on behalf of the members of the Committee on Economic Development,

____________________________

SEAN QUINLAN, Chair