Chair Luke, Vice-Chair Nishimoto, and Committee Members:
The League of Women Voters of Hawaii supports HB886 with some suggested modifications. In order to reduce income inequality and reduce the tax burden on working families living at or below the poverty line, HB886 would extend higher earner income tax brackets by two years, and would revise the income tax renter and food/excise credits for low income individuals.
The introduction to this bill clearly states the rationale for its proposals. The League would like however to add to this rationale, some considerations of the impact of poverty on families.
Poverty at the level eligible for the current rental tax credits (i.e. just above the 2015 Federal Poverty Limit for a family of 4 ($27,890) and food/excise tax credits has destructive effects on the health of individuals, and of neighborhoods; it is particularly destructive for children. In 2012 20% or 2,000 of Hawai‘i’s children under age six lived in low-income working families. 1 Eight percent, or 25,000 children under age 18 across the country lived in extreme poverty – less than half the Federal Poverty Level (FPL).2 2 Research on early childhood development shows that income insecurity negatively affects brain development – making it more difficult to form positive relationships, to learn, and to control debilitating stress. 3Providing a little financial relief to very poor families will help ameliorate these problems: a small increase in income has been found to raise childrens’ school achievement3 and to increase their later earnings4.
Given the dramatic increase in rent rates over the past decade, and in order to address the impact of inflation on incomes (last set in 1989) and credit amounts (unchanged since 1991) we strongly urge the Committee to increase the former to at least $60,000 and the rental credit amount to at least $150 per exemption.
Similarly for the Food/Excise Tax Credit, income levels and credit amounts need to be raised just to keep up with inflation since these levels were set in 2007 .A highly desirable addition to this measure would be to calculate annual increases in these income levels and credits, tied to any increases in the median income in Hawaii and the CPI for Hawaii, respectively.
The extra money families would have if SB556 is enacted would surely be spent immediately on basic necessities of life, thus adding economic activity to the State and its businesses.
We are also pleased to see the Legislature requiring an evaluation by the Tax Commission, on the best ways to reduce income inequality in Hawai`i.
We urge you to pass this bill with the addition of the suggested modifications. Thank you for the opportunity to submit testimony.
1 "Population Reference Bureau, analysis of data from the U.S. Census Bureau, 2008 - 2012 American Community Survey"
2Annie E Casey Foundation, National Kids Count. Retrieved from http://datacenter.kidscount.org/data/tables/45-children-in-extreme-poverty?loc=13&loct=2#detailed/2/any/false/868,867,133,38,35,13/any/325,326 on 3/15/2014."
3 Greg J. Duncan, Pamela Morris, and Christopher Rodrigues, “Does Money Really Matter? Estimating Impacts of Family Income on Young Children’s Achievement with Data from Random Assignment Experiments,”Developmental†Psychology, Volume 47, Issue 5, September 2011, pp.12631279; also Kevin Milligan and Mark Stabile, “Do Child Tax Benefits Affect the Wellbeing of Children? Evidence from Canadian Child Benefit Expansions,” National Bureau of Economic Research, December 2008; and Gordon Dahl and Lance Lochner, “The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit,” National Bureau of Economic Research¨ December 2008.
4See Greg J. Duncan, Ariel Kalil, and Kathleen M. ZiolGuest, “EarlyChildhood Poverty and Adult Attainment,
Behavior and Health,” Child Development¨January/February 2010, pp. 306-325.