Perhaps the most significant tax legislation in our state was passed last year, when we enacted significant increases in our standard deduction amounts and a considerable broadening of our rate brackets. It didn’t drop our highest rate, which is still second highest in the nation, but it made it much more unlikely that the top rates will kick in unless the taxpayer is making VERY serious money.
As we have mentioned before, various pieces of proposed legislation sought to dismantle all or parts of the tax cut package. There have been bills to hoist our top rate to 16 percent, to increase our general excise tax to 6 percent, to simply repeal the cuts previously enacted, and other things. Those measures seem to have met with little success at the Legislature, but, as we know, things can get resurrected at the last minute, sometimes without public notice or input.
At the same time, however, the administration has unveiled a new website, http://taxcuthawaii.org. The website features a list of FAQs about the tax cut legislation and a calculator that shows the decrease in your taxes and increase in your take-home pay.
“No! This is all wrong! Cut, cut, cut!!”
What the? We’re obviously not on a movie set here, but I hear the unmistakable bark of the Hawaii State Tax Watch Doggie.
“What are you yapping about?”
“The home page of that website shows a picture of a happy (?) couple holding a blank 2024 Form 1040. Why can’t the P.R. corps at least give them a Hawaii return? Cut! Someone get these guys a Form N-11, stat!”
Looks like the Doggie is getting kind of picky here. “Have you gone through the FAQs? Do you see anything to growl about there?”
“Hmph. As a matter of fact, I do.”
“Where?”
“When it speaks about benefits for middle-income families, in big bold type it screams that families ‘will have more money in their paychecks and bigger tax refunds.’”
“But that’s not really true?”
“Taxes will be lower, yes. Take-home pay will be bigger, yes. But tax refunds bigger? No!”
“Well, that’s right. You don’t want bigger tax refunds. A big tax refund means you loaned the government lots of money interest-free over the course of the year.”
“If you’re thinking you will get a big refund, then it’s time to adjust your withholding so you can get more take-home pay.”
“Okay. Have you checked out the tax savings calculator at all?”
“I did. And there’s something messed up there as well.”
“Oh? What would that be?”
“At the bottom of the calculation, it says, ‘This calculator only works for taxpayers claiming the standard deduction. Taxpayers who itemize their deductions may see smaller impacts.’”
“I guess they don’t know how a tax form works, do they?”
“Right. On the tax form your standard deduction is compared with your itemized deductions, and it takes the greater amount to subtract from your gross income. So itemized deductions will usually have a greater impact, not a smaller one.”
“But you know? This website, despite a few flaws here and there, at least tells me that the administration is serious about these tax cuts and won’t let them be undone so easily.”
“Yes, that is a silver lining in all of this.”
Check it out for yourself! Taxcuthawaii.org. Created by your government and approved (for the most part) by the Watch Doggie!
•••
Tom Yamachika is president of the Tax Foundation of Hawai‘i.
