Neighbor Islanders’ financial reality is precarious

A newly released report reinforces the financial struggles of Hawaii’s families in general but also highlights the increased risk to Neighbor Island families.

Tax hikes, particularly relating to the General Excise Tax, hit these families hard. Let’s look at reasons why tax hikes to balance budgets are not the answer for many.

On the Neighbor Islands, almost 60 percent are living paycheck to paycheck, according to the results and analysis of a QMark poll Hawaii Appleseed commissioned last year.

Nearly 60 percent of those living with children and those without a college degree are similarly on the financial edge. Over 70 percent of Native Hawaiians and nearly 80 percent of Filipinos report living paycheck to paycheck as well.

Those percentages don’t sound too alarming, to some, until you consider the threats to a community when those in need struggle to make ends meet. The report cites these figures:

w One in five households struggle to put food on the table, a number that rises for Native Hawaiians, those without a college degree and those under 35;

w One in four respondents reported having trouble making their rent or mortgage, a number that rises to one in three on the Neighbor Islands;

w One in five report having difficulty with back-to-school expenses.

This is why The Hawaii Appleseed Center for Law and Economic Justice is calling for state legislators to enact a Working Family Credit this session.

“We know that working families across the state are in distress,” said Hawaii Appleseed Co-Executive Director Gavin Thornton. “But this report is a reminder that things are even tougher on the Neighbor Islands. We are being told loud and clear that benefit programs that help the most vulnerable — low-income families with children and seniors — are being targeted in federal budget cuts. This is why our state leaders must step in.”

Thornton asks two simple questions:

“How can we expect Hawaii’s children to excel if they are going to school hungry, unequipped and worrying about whether they have a roof over their heads when they go home? How do we expect young leaders to emerge when they are struggling to keep body and soul together?”

We like the idea of tax credits for working families.

The problem with the General Excise Tax, as has been said, is that it hits the low-income the hardest because it’s a tax on the most basic necessities such as food, medication and rent. Hawaii Appleseed believes — and is correct — that this is an unfair burden on low-income families who pay roughly 13.5 percent of their income toward state and local taxes, while Hawaii’s highest income earners pay a much lower effective tax rate of around 8 percent.

The good news in the report is that there is broad support for the concept of using tax credits to return a portion of the taxes paid by lower-income families. In excess of 81 percent of those polled expressed support for a tax credit for working families. In Hawaii, we know there are many, many working families who are doing their best, but could use assistance. This is one way to do that.

Hawaii residents surveyed for the poll cited the benefits to the economy from helping low-income families meet their basic needs, including food and shelter. This reduces the need for public assistance, helps alleviate child poverty and boosts the economy because the tax credits will be put to use, a boon for local businesses.

The Working Family Credit would help working households make ends meet.

We don’t like higher taxes. No one does. But if this tax credit and other low-income and working-family tax credits can be more than paid for by a slight increase to income tax rates for Hawaii’s highest earners, then that is something that deserves support.

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