By Lauren Pescatore
Today, Hawaii Governor David Ige (D) signed bipartisan legislation to enact a state-level, nonrefundable Earned Income Tax Credit (EITC) worth 20 percent of the federal credit. Hawaii joins 28 other states and Washington, D.C. in offering a state-level EITC on top of the federal credit for low-wage workers struggling to make ends meet.
However, just five of those 28 state EITCs are nonrefundable, meaning the amount of the credit cannot exceed a worker’s income tax liability. Those earning the lowest wages owe little to no income tax and are often unable to benefit from nonrefundable EITCs, despite paying other taxes like sales and payroll.
Still, Hawaii’s EITC will lower taxes on more than 107,000 adult residents and over 128,000 children, according to the HI Tax Fairness coalition. Nearly half of all Hawaii residents are living paycheck-to-paycheck, and enacting a state-level EITC received broad voter support (80%) in a recent poll.
So far, 2017 has seen monumental action on state-level EITCs. Earlier this year, Montana and South Carolina enacted state-level credits. California and Illinois expanded their EITCs, and in Oregon, Gov. Kate Brown (D) signed into law a bill to increase awareness and take-up of the state EITC.