Rebalance Hawaiʻi’s upside-down tax code to achieve prosperity for all

Larisa and her husband live in Kapahulu on Oʻahu. Both work full time and earn just over the limit to qualify for SNAP, the program formerly known as food stamps.

With two children, they’re living paycheck to paycheck and struggling to keep their keiki fed. Their daughter, Kaimele, suffers from epilepsy, adding additional costs from medical bills.

When Covid hit in 2020, the price of basic necessities like food and gas jumped, pushing strained household budgets to extremes.

Larisa’s family squeaked by, in part, thanks to a temporary expansion of the federal Child Tax Credit that provided a monthly budget boost. While that cushion disappeared at the end of 2021, the cost of living burden hasn’t lessened.

The combination of Hawaiʻi’s highest-in-the-nation cost of living (in particular the cost of housing) and its comparatively low wages is pricing working families like Larisa’s out of their homes. Hawaiʻi’s homelessness and outmigration crises each stem from this unsustainable economic paradigm.

Our state tax code makes the situation worse. A comprehensive analysis of state and local taxes across the country shows that Hawaiʻi is the third-worst state when it comes to taxing struggling working families. Households in the lowest income category pay an effective tax rate of 14.1 percent, while the richest 1 percent pay an effective tax rate of 10.1 percent.

While families like Larisa’s were struggling during the pandemic, the top 20 percent of households got richer. The conditions that created this inequity—and the cycle of poverty it perpetuates—are the result of policy choices. Better policy choices can reverse the cycle.

The Hawaiʻi Legislature has the power to rebalance the tax code, easing the high burden on working families while increasing the share owed by the wealthy and corporations.

This strategy puts more money into the pockets of working families, stimulating our consumer economy.

At the same time, increasing taxes on wealth generates tax revenue for critical investments in our communities from those who can best afford to contribute.