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Minimum wage increase and tax credits are approved

The novel coronavirus cast a long shadow over state lawmakers’ big plans Tuesday as the House and Senate approached the midpoint of the legislative session, with some lawmakers worrying the state economy will take a painful hit if would-be travelers cancel their plans to visit Hawaii out of fear of the virus.

The state House approved bills Tuesday to increase tax credits to help renters and to offset the impact of the state excise tax on food, and another measure to dramatically expand the state’s earned income tax credit. Each of those proposals is designed to provide tax relief to help make Hawaii more affordable for working families.

But those initiatives would cost the state upward of $73 million a year, and they now may be hanging in the balance. Other initiatives advanced by lawmakers Tuesday such as a push to sharply expand preschool access for 3- and 4-year-olds also could be in jeopardy.

A panel of experts called the Council on Revenues is scheduled to make new projections next week to try to account for the likely impact of the COVID-19 virus on state tax collections, and a grim prognosis could force lawmakers to reconsider their plans.

At its last meeting in January, the council predicted tax collections for this year will grow by 4.1% and then grow by another 4% in the fiscal year that begins July 1. That would amount to hundreds of millions of dollars of extra cash for the state treasury, but a sharp downturn in the state’s critically important tourism industry could change all that.

“It is concerning,” said House Finance Chairwoman Sylvia Luke after lawmakers voted Tuesday to approve key elements of the “Helping Working Families” package of tax credits and an increase in the minimum wage. “It’s not so much the outbreak that is the concern; it’s the economic impact.”

But she added that “right now we’re still committed to the package.”

“Regardless of what the economic response is, the most vulnerable population will be the working class and the low-income working families, so at this point in time it’s even more important for us to pass the wage (and) tax credit bill, because this is a time to really support those working families,” Luke said.

The state is much better prepared for an economic shock today than it was in the lead-up to the Great Recession in 2008 or the Sept. 11 attacks in 2001, she said, with more than $375 million now tucked away in the state’s “rainy day” Emergency Budget and Reserve Fund.

Still, lawmakers and the Council on Revenues have asked for a special briefing from state Chief Economist Eugene Tian, and on Tuesday the House approved House Resolution 54 to create a Select House Committee on COVID-19 Economic and Financial Preparedness.

House Speaker Scott K. Saiki introduced the measure t0 bring together representatives from government, private industry, unions and nonprofit agencies to identify steps that should be taken to brace for the financial effects of an outbreak.

The resolution acknowledges COVID-19 could deeply affect Hawaii’s economy. The Honolulu Festival and the Festival of Pacific Arts &Culture already have been canceled or postponed amid coronavirus concerns, and pop star Mariah Carey announced Tuesday she is postponing her scheduled March 10 concert.

The House also voted to approve House Bill 2541, which would increase the minimum wage from $10.10 an hour today to $11 on Jan. 1, and continue to increase the minimum in a series of steps until it reaches $13 an hour on Jan. 1, 2024.

State Rep. Tina Wildberger (D, South Maui) described that minimum wage increase as “too little, too late” to provide the help that low-income working people need, while Republican Minority Whip Val Okimoto said the bill “does not do enough to protect Hawaii’s small businesses.”

“I fear our small-business owners will be forced to cut hours, cut positions or, as some of my constituents have indicated, to shutter the doors completely, collect unemployment and apply for public assistance benefits,” said Okimoto (R, Mililani-Mililani Mauka- Waipio Acres).

HB 2541 also would create a refundable earned income tax credit for working families and would increase the state’s food/excise tax credit to $150 per person for families that earn less than $30,000 per year.

State tax officials testified that providing a refundable state earned income credit would cost the state about $41 million more a year, while increasing the food/ excise tax credit would cost the state an extra $36 million.

The Senate on Tuesday also passed a variety of bills affecting taxes, illegal drugs, medical cannabis, vaping and other issues:

>> Senate Bill 2488 appropriates $26.8 million for the fiscal year that begins July 1 to pay incentives for special-education teachers, Hawaiian language immersion teachers and teachers in hard-to-staff areas such as the Hana-Lahainaluna-Lanai-Molokai and Nanakuli-Waianae complex areas.

In other Senate action:

>> Cannabis: Employers would not be allowed to discriminate against a person in hiring, termination or condition of employment based on the person’s status as a medical cannabis cardholder, under Senate Bill 2543.

But certain categories of employment would be exempt, and employers may test for medical cannabis for dangerous jobs.

Also, Senate Bill 2586 would allow medical cannabis patients to be reimbursed by health insurers, mutual benefit societies and health maintenance organizations for money spent on medical cannabis and manufactured cannabis products.

>> Dangerous drugs: It would be a misdemeanor — and no longer a Class C felony — to possess less than 2 grams of a “dangerous drug” such as methamphetamine, heroin, morphine and cocaine, under Senate Bill 2793.

>> Taxation: The environmental response, energy and food security tax would be increased by an unspecified amount to address carbon dioxide emissions in 2021, under Senate Bill 3150. The plan is to incrementally increase the tax rate so that the tax rate shall be equivalent to a carbon price of an unspecified amount per metric ton of carbon emissions by 2030. There also would be a refundable tax credit for lower-income earners.

And Senate Bill 2216 creates an “empty homes conveyance tax” against certain residential property owners who own a vacant residential unit in Hawaii.

>> Vaping: The sale of flavored tobacco products would be banned under Senate Bill 2903.

>> Hemp: A regulatory framework would be created for products containing cannabidiol that were manufactured legally, under Senate Bill 2050. Product labeling would be required, and manufacturers would be prohibited from making health claims.

>> Explosion detection: An unspecified amount of money would go to island police departments to buy explosion detection technology to locate explosions caused by illegal use of firearms and fireworks, under Senate Bill 2406.

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