January 30, 2013

Pacific Business News: Hawaii’s poorest residents pay highest share of income in taxes

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(Original Post)

Jan 30, 2013, 12:17pm HST

Staff Pacific Business News

Low- and middle-income families in Hawaii pay a larger share of taxes than the top 20 percent of earners in the Islands, ranking the state the fourth worst in the nation with a tax system that favors high earners, according to a study released by the Institute on Taxation and Economic Policy.

Hawaii ranked behind Arizona, Arkansas and Florida, while Illinois, Indiana, Pennsylvania, Rhode Island, Texas and Washington rounded out the list of the 10 states with the highest taxes on the poor, the study found.

The study found that people in the bottom 20 percent of income groups — those earning less than $17,000 — pay a total of 13 percent in taxes, when general excise, property and income taxes are combined. The next 20 percent, people earning between $17,000 and $32,000 a year, pay a combined 12.4 percent in taxes, while the middle 20 percent, who earn between $32,000 and $50,000 a year, pay 11.6 percent.

The fourth 20 percent of earners, those making between $50,000 and $81,000, pay a combined 10 percent, while the next 15 percent pay a combined 8.4 percent in taxes.

The top 5 percent of earners pay the least amount of their income in taxes, according to the report. The 4 percent earning $159,000 to $326,000 pay a combined 7.5 percent, while the top 1 percent, who earn $326,000 or more, pay a combined 8 percent.

The data show that the bottom earners pay the highest percentage of G.E.T., while the top earners pay the most income tax.

The group noted that the Hawaii Legislature is considering several bills this year that would help to reduce the tax burden on low-income families by creating a state earned income tax credit program and a poverty tax credit.

“These bills would go a long way to restoring equity in our state income tax system by implementing the proposed state EITC and poverty tax credit,” Victor Geminiani, executive director of the nonprofit Hawaii Appleseed Center on Law and Economic Justice, said in a statement. “They would help the poorest among us survive the many economic challenges they face to their basic survival while eliminating the anomaly of taxing further into poverty those individuals and families who are earning the state’s lowest incomes.”

Hawaii ranked as the fifth-worst state in the nation in the last report done by the Institute on Taxation and Economic Policy, which was in late 2009.



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