Tax Commission To Weigh Elimination Of State Income Taxes

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Graphic illustration by Emily Metcalf

BY JIM DOOLEY – The Hawaii Tax Review Commission is soliciting the services of a consultant to study the fairness of Hawaii’s tax system and recommend changes, including the possible elimination of personal and corporate income taxes.

A national state-by-state analysis of taxes completed in 2009 and referenced on the Hawaii Tax Review Commission’s website found that Hawaii has the sixth-highest tax burden on poor residents, who pay twice as much of their income in taxes as do Hawaii’s wealthiest residents.


Those earning less than $18,000 per year paid 12.2 per cent of their income in state and local taxes, the study reported. Hawaii’s wealthiest – with an average income of just over $1 million per year – paid a tax rate of 6.3 per cent, said the report.

The study was conducted by the Institute on Taxation and Economic Policy and can be found here: 2009 tax study.

Lowell Kalapa, president of the Tax Foundation of Hawaii, noted that the 2009 study is somewhat dated and does not take into account recent changes to the state tax code, including suspension or capping of some deductions that were previously available to upper income taxpayers.

The state Tax Review Commission is convened every five years.

On Monday, the commission solicited bids from qualified economists and accountants to “prepare a comprehensive study of the Hawaii tax system with particular focus on whether the State’s tax system is adequate to finance current and future needs of the State in the 21st Century.”

The study should include reform recommendations including “alternate tax structures” that would “generate sufficient revenues during economic downturns such as the Great Recession,” the commission said.

Among the possibilities to be addressed were:

  • should the exemptions from Hawaii’s general excise tax and use taxes be retained?
  • should personal and corporate net income taxes be replaced with an expanded general excise tax?

The cost of the consultant study is projected to be between $100,000-$150,000.

The contract will be awarded December 29 and the final report must be submitted by June 30, 2012.