HOUSE OF REPRESENTATIVES

H.B. NO.

1141

THIRTY-SECOND LEGISLATURE, 2023

 

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO TAXES.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 

     SECTION 1.  The legislature finds that Hawaii has one of the highest individual income tax rates in the country.  Even a single filer working at the minimum wage of $10.10 an hour, which is about $20,200 a year, must pay $1,008 plus 7.2 percent of excess over $19,200.  According to the United States Department of Housing and Urban Development, annual income of up to $63,350 qualifies as low income for a single person in Honolulu.  An individual at this income level is required to pay $3,214 plus 8.25 percent of anything over $48,000.  It is clear that Hawaii's individual income tax structure disproportionately burdens low- and moderate-income households.

     Furthermore, filers at low- to medium-income levels contribute relatively little to overall individual income tax revenues. In 2016, 72.61 percent of income tax revenue was generated by filers making more than $75,000 a year. 

     The State can maintain the same level of state revenue by repealing the individual income tax on those making $20,000 or less per year and slowly scaling marginal tax rates for those making $75,000 or less.  Using 2016 revenue data, making this adjustment would result in a loss of only $198 million while adding a consequential amount of money back into residents' paychecks.

     Revenue loss can be offset by increasing a several taxes by a small amount.  A tiny 0.15 percent on the general excise tax will have a negligible impact on resident's daily purchasing and will export more of the overall tax burden to visitors and non-residents.  Increasing the transient accommodations tax by 0.50 percent will likewise transfer the tax burden away from working residents onto tourists.  Finally, the liquor and cigarette taxes have not been increased in over ten years, even as Hawaii's economy has grown and visitor industry boomed. Increasing the liquor and cigarette taxes by modest amounts will result in additional revenue from the state without unduly burdening citizens.

     The purpose of this Act is to repeal the individual income tax for single and heads-of-household filers making less than $20,000 a year or $40,000 a year for joint filers, scale low- and middle-income tax rates more slowly, and raise other taxes slightly to make the income tax reduction revenue-neutral.

     SECTION 2.  Section 235-51, Hawaii Revised Statutes, is amended by amending subsections (a), (b), and (c) to read as follows:

"PART III.  INDIVIDUAL INCOME TAX

     §235-51  Tax imposed on individuals; rates.  (a)  There is hereby imposed on the taxable income of every:

     (1)  Taxpayer who files a joint return under section 235-93; and

     (2)  Surviving spouse,

a tax determined in accordance with the following table:

     [In the case of any taxable year beginning after December 31, 2017:

          If the taxable income is:     The tax shall be:

          Not over $4,800              1.40% of taxable income

          Over $4,800 but              $67.00 plus 3.20% of

            not over $9,600              excess over $4,800

          Over $9,600 but              $221.00 plus 5.50% of

            not over $19,200             excess over $9,600

          Over $19,200 but             $749.00 plus 6.40% of

            not over $28,800             excess over $19,200

          Over $28,800 but             $1,363.00 plus 6.80% of

            not over $38,400             excess over $28,800

          Over $38,400 but             $2,016.00 plus 7.20% of

            not over $48,000             excess over $38,400

          Over $48,000 but             $2,707.00 plus 7.60% of

            not over $72,000             excess over $48,000

          Over $72,000 but             $4,531.00 plus 7.90% of

            not over $96,000             excess over $72,000

          Over $96,000 but             $6,427.00 plus 8.25% of

            not over $300,000             excess over $96,000

          Over $300,000 but             $23,257.00 plus 9.00% of

            not over $350,000             excess over $300,000

          Over $350,000 but             $27,757.00 plus 10.00% of

            not over $400,000             excess over $350,000

          Over $400,000                $32,757.00 plus 11.00% of

                                         excess over $400,000.]

     In the case of any taxable year beginning after December 31, 2023:

     If the taxable income is:     The tax shall be:

     Over $40,000 but             $1,008.00 plus 3.6% of

       not over $48,000              excess over $40,000

     Over $48,000 but             $1,354.00 plus 4.94% of

       not over $72,000              excess over $48,000

     Over $72,000 but             $3,851.00 plus 6.72% of

       not over $96,000              excess over $72,000

     Over $96,000 but             $5,784.00 plus 7.5% of

       not over $300,000             excess over $96,000

     Over $300,00 but             $23,257.00 plus 9.00% of

       not over $350,000             excess over $300,000

     Over $350,000 but            $27,757.00 plus 10.00% of

       not over $400,000             excess over $350,000

     Over $400,000                $32,757.00 plus 11.00% of

                                    excess over $400,000.

     (b)  There is hereby imposed on the taxable income of every head of a household a tax determined in accordance with the following table:

     [In the case of any taxable year beginning after December 31, 2017:

          If the taxable income is:     The tax shall be:

          Not over $3,600              1.40% of taxable income

          Over $3,600 but              $50.00 plus 3.20% of

            not over $7,200              excess over $3,600

          Over $7,200 but              $166.00 plus 5.50% of

            not over $14,400             excess over $7,200

          Over $14,400 but             $562.00 plus 6.40% of

            not over $21,600             excess over $14,400

          Over $21,600 but             $1,022.00 plus 6.80% of

            not over $28,800             excess over $21,600

          Over $28,800 but             $1,512.00 plus 7.20% of

            not over $36,000             excess over $28,800

          Over $36,000 but             $2,030.00 plus 7.60% of

            not over $54,000             excess over $36,000

          Over $54,000 but             $3,398.00 plus 7.90% of

            not over $72,000             excess over $54,000

          Over $72,000 but             $4,820.00 plus 8.25% of

            not over $225,000             excess over $72,000

          Over $225,000 but             $17,443.00 plus 9.00% of

            not over $262,500             excess over $225,000

          Over $262,500 but             $20,818.00 plus 10.00% of

            not over $300,000             excess over $262,500

          Over $300,000                $24,568.00 plus 11.00% of

                                         excess over $300,000.]

     In the case of any taxable year beginning after December 21, 2023:

     If the taxable income is:     The tax shall be:

     Over $20,000 but             $281.00 plus 2.60% of

       not over $21,600              excess over $20,000

     Over $21,600 but             $511.00 plus 3.4% of

       not over $28,800              excess over $21,600

     Over $28,800 but             $756.00 plus 3.6% of

       not over $36,000              excess over $28,800

     Over $36,000 but             $1,320.00 plus 4.90% of

       not over $54,000              excess over $36,000

     Over $54,000 but             $2,888.00 plus 6.72% of

       not over $72,000              excess over $54,000

     Over $72,000 but             $4,097.00 plus 7.00% of

       not over $225,000             excess over $72,000

     Over $225,000 but             $17,443.00 plus 9.00% of

       not over $262,500             excess over $225,000

     Over $262,500 but            $20,818.00 plus 10.00% of

       not over $300,000             excess over $262,500

     Over $300,000 but            $24,568.00 plus 11.00% of

                                        excess over $300,000.

     (c)  There is hereby imposed on the taxable income of (1) every unmarried individual (other than a surviving spouse, or the head of a household) and (2) on the taxable income of every married individual who does not make a single return jointly with the individual's spouse under section 235-93 a tax determined in accordance with the following table:

     [In the case of any taxable year beginning after December 31, 2017:

          If the taxable income is:     The tax shall be:

          Not over $2,400              1.40% of taxable income

          Over $2,400 but              $34.00 plus 3.20% of

            not over $4,800              excess over $2,400

          Over $4,800 but              $110.00 plus 5.50% of

            not over $9,600              excess over $4,800

          Over $9,600 but              $374.00 plus 6.40% of

            not over $14,400             excess over $9,600

          Over $14,400 but             $682.00 plus 6.80% of

            not over $19,200             excess over $14,400

          Over $19,200 but             $1,008.00 plus 7.20% of

            not over $24,000             excess over $19,200

          Over $24,000 but             $1,354.00 plus 7.60% of

            not over $36,000             excess over $24,000

          Over $36,000 but             $2,266.00 plus 7.90% of

            not over $48,000             excess over $36,000

          Over $48,000 but             $3,214.00 plus 8.25% of

            not over $150,000             excess over $48,000

          Over $150,000 but             $11,629.00 plus 9.00% of

            not over $175,000             excess over $150,000

          Over $175,000 but             $13,879.00 plus 10.00% of

            not over $200,000             excess over $175,000

          Over $200,000                $16,379.00 plus 11.00% of

                                         excess over $200,000.]

     In the case of any taxable year beginning after December 31, 2023:

     If the taxable income is:     The tax shall be:

     Over $20,000 but             $504.00 plus 3.60% of

       not over $24,000              excess over $20,000

     Over $24,000 but             $677.00 plus 3.8% of

       not over $36,000              excess over $24,000

     Over $36,000 but             $1,473.00 plus 5.10% of

       not over $48,000              excess over $36,000

     Over $48,000 but             $2,411.00 plus 6.20% of

       not over $150,000             excess over $48,000

     Over $150,000 but             $11,629.00 plus 9.00% of

       not over $175,000             excess over $150,000

     Over $200,000                $16,379.00 plus 11.00% of

                                    excess over $200,000."

     SECTION 3.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 5.  This Act shall take effect on July 1, 2023.

INTRODUCED BY:

_____________________________

 

 

 

 

Report Title:

Individual income tax reduction

 

 

Description:

Eliminates the individual income tax for single filers and heads of households making less than $20,000 or joint filers making less than $40,000 and increases the income tax rate more slowly for low- and medium-income filers.

 

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.