Chair Tokuda, Vice-Chair Kouchi, and Committee Members:
The League of Women Voters of Hawaii supports SB553, which would reduce or eliminate the income tax liability for the very poor by providing an income tax credit that reduces the tax liability for poor people.
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 middleclass. SB553 is an admirable and badly needed vehicle for achieving this purpose in Hawai`i.
As we are all aware, workers at the bottom of the income scale have seen virtually no income growth since the recession, even while incomes at the top have grown dramatically. Eliminating income taxes on poor families allows them to keep more of what they earn. It can help to offset the child care and transportation expenses that families incur as they strive to become economically self sufficient.
The population addressed by this bill is in dire need of relief. Current Federal Poverty Guidelines (100%FPL) for Hawai`i are displayed on the next page. I’m sure none of us here can imagine living in Hawaii on this income, or even 125% of these incomes (i.e. $34,862 for a family of four). What’s more, if nothing is done now, our state income tax will be imposed on families with lower and lower incomes each year, as it has since the year 2000. 2
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 income taxes. The extra money they would have if SB553 is enacted would be spent immediately on basic necessities of life, thus adding economic activity to the State and its businesses.
Source: Federal Register Notice, January 22, 2015
We do not expect that eliminating the tax liability for the poor as described in the bill would cause revenue insufficient to cover basic state services, but we hope the Department of Taxation will provide your Committee confirmation of the revenue impact. We urge you to pass this bill. Thank you for the opportunity to submit testimony.
|2015 POVERTY GUIDELINES FOR HAWAII|
|Persons in family/household||Poverty|
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.