Hawaii residents should receive up to $300 in state tax rebates by electronic transfer or check, and rather soon, if a bill passed earlier this month is enacted July 1 as envisioned.
State government administrators are opting to diverge from a historical practice of delivering special legislative tax rebates through a following year’s tax return, and instead are preparing to issue direct bank deposits and checks in the next few months if Senate Bill 514 clears a legal and technical review by Gov. David Ige’s administration.
The bill has an enactment date of July 1, and Ige will sign it if it passes the review, according to Jodi Leong, Ige’s deputy communications director.
State Comptroller Curt Otaguro roughly estimates that checks could start to go out as early as late August or September, and that direct deposits could happen even sooner if the bill is enacted.
Otaguro also said it could take at least three weeks just to print all the checks. That’s because the state Department of Accounting and General Services can physically print a maximum of 20,000 checks per day, and a preliminary estimate is that around 300,000 checks will need to be printed.
“It’s not going to be a drop bomb where everybody gets a check the same day,” he said. “It’ll be rolling.”
The tax rebate bill appropriates $300 per exemption for individuals earning under $100,000 and couples earning less than double that, and $100 for people earning more than those amounts. A married couple filing jointly that earns less than $200,000 and has two dependents would receive $1,200.
In total, the tax refunds are expected to cost $250 million and be distributed to about 1.1 million residents.
If all that money gets conveyed, state leaders will have achieved goals to give residents some modest financial relief and trigger extra spending in a local economy recovering from a sharp downturn touched off by the coronavirus pandemic.
Tom Yamachika, president of the nonprofit Tax Foundation of Hawaii, said a near-term payout makes good sense as opposed to having taxpayers claim rebates through tax return filings next year.
“It’s way better than waiting till next year,” he said. “People are hurting now.”
SB 514 did not specify how rebates would be distributed, but Colin Moore, director of the University of Hawaii’s Public Policy Center, said lawmakers have to be pleased with the more expedient route because district reapportionment requires that all 76 seats at the Legislature are up for election later this year.
“For legislators, they would like to partly campaign on this,” he said. “For sure, for the Legislature, the sooner the better politically.”
Yamachika echoed that sentiment. “We can’t understate that factor,” he said.
In recent decades, most if not all such legislative tax rebates have been delivered through tax returns.
Under Hawaii’s Constitution, the state for many years had to provide a tax refund or credit if there was at least a 5% general fund surplus in two successive fiscal years. This provision was amended twice, first in 2010 to also or alternatively permit a deposit into the state’s emergency reserve fund, and in 2016 with additional options to pre-pay general obligation bond debt and post-employment benefit funding.
Most past rebates to meet the constitutional requirement were symbolic, often $1. Higher rebates of $100 in 1981, $125 in 1989 and an income-qualified one that ranged from $25 to $140 in 2007 could be claimed upon filing tax returns in the following year.
This year’s pending rebate will carry an extra expense to deliver sooner, but is intended to help struggling residents and contribute to Hawaii’s economic recovery.
Ige proposed $100 tax rebates during his State of the State address in January, and lawmakers enhanced the amount for moderate- and lower-income residents partly in response to high inflation that has made gasoline, food and other things considerably more expensive this year.
The governor described his plan as providing relief to taxpayers, many of whom have suffered job losses or work reductions during the pandemic, and encouraging extra spending that benefits the local economy.
“Whether it is buying a plate lunch or purchasing an item from a local vendor, it will help our small businesses and help keep our local people employed,” Mike McCartney, director of the state Department of Business, Economic Development and Tourism, said in written testimony on one of the governor’s bills proposing the $100 rebate.
Marge Arakaki, a retiree in Honolulu, said Thursday that she appreciates a sooner-rather-than-later rebate that she and her husband would likely put toward everyday expenses. She added that others in her family, nieces and nephews with children, will benefit more.
“They have a lot of expenses,” Arakaki said. “I know that would be a big help to them.”
Not all residents in the state will receive the rebate if SB 514 is enacted.
Under the bill, rebates wouldn’t be available to people convicted of a misdemeanor or felony if they are incarcerated for all of this year, as well as dependents held at a youth correctional facility for all of this year.
The bill also requires that qualifying resident taxpayers need to file a state income tax return for the 2021 taxable year by the last day of this year.
“Failure to comply with this filing requirement shall constitute a waiver of the right to claim the refund provided under this Act,” the bill states.
April 20 was the deadline to file 2021 Hawaii tax returns, though some filers may have sought or automatically received extensions. Others who don’t have to file can still file to receive a rebate.
Will White, director of the nonprofit Hawaii Budget and Policy Center, encourages residents who may not typically file tax returns to file so they don’t miss out.
Such residents, who may not file returns because they don’t earn enough to owe taxes, can take advantage of free tax preparation services to take advantage of the tax rebate.
“If you haven’t filed, go ahead and file, because you’re leaving money on the table,” White said.
