Hawaii Gov. Josh Green signed into law two bills to provide historic tax relief to working families. The historic tax relief from Hawaii includes the largest tax cut in the state’s history and tax exemption for medical services.
Historic tax relief from Hawaii: what does it offer?
On Monday, Gov. Green signed two major pieces of legislation – House Bill (HB) 2404 and Senate Bill (SB) 1035.
“This legislation is a historic step toward addressing the financial challenges and the cost-of-living crisis faced by Hawaiʻi’s working families,” Governor Green said in a press release. “By doubling the standard deduction and amending the tax brackets, HB 2404 provides much-needed tax relief to our residents.”
HB 2404 makes the tax code more progressive to provide the largest income tax cut for working families in the state’s history. Basically, HB 2404 eliminates the taxes for those in the lowest bracket and reduces the tax rate for all others for seven years.
The governor noted that HB 2404 will result in a $5.6 billion tax reduction between early 2025 and 2031 and a 70% drop in state income taxes paid by working-class families by 2031.
For example, a family of four with a median household income of $88,000 would see an increase of $3,613 in their take-home pay by 2031. The family would owe $5,086 in state taxes based on the current tax law, but they would owe only $1,479 if the new tax code is implemented.
The historic tax relief from Hawaii is more likely to reduce the tax liability of lower-income families than for higher-income taxpayers. More taxpayers will see their tax liabilities transform into tax refunds. Also, the changes will put Hawaii from being the second highest-taxed state to the fourth-lowest.
Massive relief for the healthcare system
SB 1035 exempts hospitals, medical clinics, pharmacies and others from the state’s General Excise Tax (GET) reimbursed through Medicaid, Medicare or TRICARE. In all, SB 1035 will provide massive relief to the healthcare system in Hawaii.
“By exempting healthcare and dental services reimbursed from these critical programs from the GET, we will promote increased equity and access to healthcare and strengthen our healthcare infrastructure,” the governor said.
Doctors believe that eliminating excise tax from medical services will help save practices, especially on neighboring islands and in rural areas. Also, many doctors currently turn away new Medicaid or Medicare patients, but the new tax break will encourage doctors to treat those patients.
SB 1035 has been endorsed by over 155 healthcare professionals and is expected to address the shortage of almost 800 physicians in the state. Moreover, a recent survey of physicians by the John A. Burns School of Medicine found that eliminating the GET on medical services would help recruit and maintain more physicians.
Although the historic tax relief from Hawaii has been lauded by many groups, some have expressed concerns about how the state will manage its budget going forward.
