Chair CHUN-OAKLAND, Vice-Chair GREEN, MEMBERS OF THE COMMITTEE:
The League of Women Voters of Hawaii supports SB 2206 which would address poverty in Hawai`I by 1) establishing an earned income tax credit fixed at 10% of the taxpayer’s federal earned income tax credit; 2) eliminating state income tax liability for families whose adjusted gross income is at or below the poverty level, and reducing the liability for those between 100% and 125% of the Federal Poverty Level (FPL); 3) increasing the low-income household renters credit and indexing it to inflation; 4) establishing a food/excise tax credit for low-income households and indexing the credit to inflation.
The League believes that public policy should promote self-sufficiency, and that the most effective social programs are those designed to prevent or reduce poverty. The League also believes that fiscal policy should provide for taxes that are progressive overall, applying higher tax rates as income increases. While it is true that our income tax rates are already highly graduated for low-income filers, can’t we go further to ease the tax burdens on our low-income working families? We point out that Hawaii is only one of 15 states to tax families of four with incomes at the poverty level.1 Let’s help these low income working families move into the middle class. SB2206 is an admirable and badly needed vehicle for achieving this purpose in Hawai`i.
The population addressed by this bill is in dire need of relief. Currently the Federal Poverty Guidelines (100%FPL) are as follows :2
|2014 POVERTY GUIDELINES FOR HAWAII|
|Persons in family/household||Poverty|
I’m sure none of us here can imagine living in Hawaii on this income, or even 125% of these income (i.e. $34,280 for a family of four).
A single parent of one child working at minimum wage 40 hours per week, 52 weeks per year, earns 16% below the federal poverty guidelines for a family of two. Unfortunately many of our hard-working citizens are in this situation. Hawai‘i's poverty rate of 17.3% (approximately 240,000 individuals) makes Hawai‘i the 9th poorest in the nation.3
In 2012 20% or 2,000 of Hawai‘i’s children under six lived in low-income working families.4
Research on early childhood development has found that income insecurity negatively affects three key aspects of brain development – positive relationships, learning resources, and high stress. Surely we should reward these working families by not reducing their inadequate incomes through overly high income taxation. The extra money they would have if SB2206 is enacted would surely be spent immediately on basic necessities of life, thus adding economic activity to the State and its businesses.
The League of Women Voters concurrently supports raising the minimum wage, as outlined in our testimony on SB 2609. We think the combination of a more adequate minimum wage and the tax credits outlined in this bill constitute a powerful, efficient anti-poverty program. We point out that even with the proposed income tax changes, our low-income families will still be contributing to other state tax revenue, including excise taxes and gasoline taxes.
Finally, we hope our State Tax Department and the Department of Business and Economic Development will provide some analysis on this bill for the benefit of this Committee and all Hawaii citizens. We want to move forward with confidence that the income tax changes proposed will still provide adequate resources for our State programs and services.
We urge you to pass this bill. Thank you for the opportunity to submit testimony.
3 U.S. Census Bureau, Current Population Reports, Supplemental Poverty Measure: 2012
4 Population Reference Bureau, analysis of data from the U.S. Census Bureau, 2008 - 2012 American Community Survey.