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Hawaii Tax Reform Bill Passes Committee

House Bill 1586, which attempts to change the basic structure of taxes in Hawaii, was passed by the House Tourism Committee Tuesday.

The bill not only addresses Hawaii’s high cost of living by reducing personal income tax brackets for low and middle income earners and seniors, but also looks at how the counties’ property tax rates are one of the primary reasons for the State’s high housing costs.

“Our residents, especially low and middle income taxpayers, are paying too much income tax,” said Rep. Kyle T. Yamashita, “At the same time, non-residents can buy homes in Hawaii, with the nation’s lowest property tax rates, and yet in most cases, they pay no income tax to the State. This has the effect of keeping the cost of buying a home out of the reach of many of Hawaii’s people and causing property valuation to continuously rise.”

The bill would also end the $103 million subsidy the state provides to the counties from a portion of the Transit Accommodations Tax. Removing this subsidy would make up for part of the reductions in personal income tax collections and encourage the counties to raise property taxes for non-residents and other categories that affect the rising housing costs, Yamashita said.

“We need to restructure how we tax to fuel positive economic outcomes. We cannot continue to make band-aid changes to our tax structure and think anything will really change,” said Yamashita. “This bill is the first step in making taxes more equitable for residents and, if the counties follow suit, will make investors buying homes in Hawaii pay their fair share.”

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