January 13, 2015


State & Local Taxes in 2015


Hawaii Tax Code Features

Progressive Features

• Graduated personal income tax structure

• Limits itemized deductions for upper-income taxpayers

• Personal exemption phases out for upper-income taxpayers

• Provides refundable income tax credits to reduce impact of sales, excise, and property taxes

• Requires the use of combined reporting for the corporate income tax

Regressive Features

• Provides preferential income tax rates for income from capital gains

• Comparatively high reliance on sales and excise taxes

• State and local sales tax bases include groceries

• Provides a partial income tax deduction for state income taxes paid

• Fails to provide a refundable Earned Income Tax Credit (EITC)

• Comparatively high cigarette tax rate

Tax Changes Enacted in 2013 & 2014

• No significant developments

ITEP Tax Inequality Index

According to ITEP’s Tax Inequality Index, Hawaii has the 15th most unfair state and local tax system in the country. States with regressive tax struc­tures have negative tax inequality indexes, meaning that incomes are less equal in those states after state and local taxes than before (See Appendix B for state-by-state rankings and more details)

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