The pressure appears higher-than-normal at the Legislature to settle on a final draft of the state budget bill, and there’s only several days left to reach a compromise.
A majority in the Senate last week described to a group of House members what sounded like a line in the sand over a pending 91直播 income tax relief bill that could dramatically affect how much revenue the state has to spend next fiscal year.
At an initial meeting last Wednesday with House counterparts to resolve differences over budget bill appropriations, Sen. Donovan Dela Cruz, chair of the Senate Ways and Means Committee overseeing state finances, said that until the fate of the tax relief bill is determined no further differences would probably be resolved.
After that declaration, a meeting scheduled for last Friday to resume work on resolving disagreements in the budget measure, House Bill 1800, was cancelled.
Reconvening face-to-face discussions between the Senate and House conference committees to produce a compromise draft of HB 1800 had not been scheduled as of Monday afternoon. The deadline to produce a compromise draft is Friday.
Before the initial conference meeting on HB 1800 last Wednesday, all 13 members of the Senate negotiating team led by Dela Cruz offered opening remarks, an unusual practice.
“It is difficult to know how much the state can continue to afford in new spending without knowing how we will continue to provide meaningful tax relief to our working families and middle-class-income families,” Dela Cruz (D, Mililani-Wahiawa-Whitmore Village) said in leading off opening remarks.
The Legislature in 2024 passed the biggest package of 91直播 income tax cuts in history. It reduces taxes annually over eight years through 2031 by increasing standard deductions in even-number years and adjusting tax brackets in odd-number years.
Gov. Josh Green in January proposed legislation to repeal the last five years of cuts to offset anticipated declines in federal funds through 2031.
The Senate prefers not to repeal any cuts except for households in tax brackets for joint filers earning over $350,000, a head of household earning over $262,500 and single filers earning over $175,000.
The House is pushing to keep standard deduction increases in 2028 and 2030 and to repeal tax bracket reductions in 2027, 2029 and 2031 for everyone, while also adding 1 percentage point to the tax rate on an upper tier of income for taxpayers in the state’s three highest tax brackets effective in 2027.
The pending tax relief bill, Senate Bill 3125, was last amended by the House Finance Committee to reflect the House position. On Monday, an initial House-Senate conference committee meeting was scheduled for Tuesday to work on a potential compromise draft for this bill.
Dela Cruz said the House plan would raise taxes on too many people, including many doctors and small-business owners facing a tax increase of nearly $1,200 over the next five years.
“Before we consider raising taxes on residents, we must share responsibility and take common sense actions like eliminating vacant positions, moving state corporations and authorities that can raise their own revenues off the general fund, and sweeping excess cash from non-general fund accounts,” he said during last Wednesday’s meeting.
“Fiscal responsibility does not mean sacrificing critical services,” he added. “We can maintain safety net programs like SNAP and Medicaid, rural healthcare, and more if we do the hard work and tightening the state’s belt.”
A dozen other senators, who with Dela Cruz represent a majority in the 25-member Senate, also expressed views on tax relief or ways to balance state revenue and spending in opening remarks during last Wednesday’s meeting with House negotiators on the budget bill.
“I mean, none of us in this room and outside the room want to pay more in taxes,” said Sen. Glenn Wakai (D, Kalihi-Salt Lake-Pearl Harbor). “And what the public despises even more is a broken promise. We assured them of a historic tax cut two years ago. And what we’re contemplating now is a historic bait and switch. That is unacceptable.”
Sen. Lynn DeCoite (D, East and Upcountry Maui-Molokai-Lanai) said that over the next eight years under the current tax statute an average 91直播 household with three to four members would save around $19,000 to $20,000.
“That is $20,000 that these families could put towards the down payment of a new home or towards a new car,” she said. “This relief that we promised to the people of 91直播 will help them now. Promise made, promise kept.”
Sen. Troy Hashimoto (D, Wailuku-Kahului-Waihee) said the savings for a family of four in Kahului could be $4,118 and amount to one month of rent and other necessities.
“Keeping the tax cuts would allow families to save an exponential amount of money that could impact their lives,” he said.
Sen. Donna Kim (D, Kalihi-Fort Shafter-Red Hill) said she can’t agree to the tax increase under the House draft of SB 3125 until state agencies and departments operate efficiently.
“If we hold our government and we hold ourselves accountable and exercise prudent spending, we’ll have enough money,” she said. “We do have enough money, okay? But poor decisions are being made, and that’s (lost) millions of dollars — failed programs that have cost millions of dollars. … Our citizens need relief. They need to know that when we say we’re going to promise them tax relief, we’re going to give that.”
Sen. Lorraine Inouye (D, Hilo-Pepeekeo) referenced a provision in the House draft of SB 3125 that would broaden and extend tax credits for lower-income households, but said that doesn’t help as much as preserving tax cuts.
“Increasing the standard deduction and adjusting the brackets provides monies back to the taxpayers’ pocket day to day, and they never have to wait or apply for help,” she said.
The lone Republican member of the Senate committee, Sen. Kurt Fevella, also discounted the tax credit provision in part because many working-class families don’t qualify.
“Our taxpayers need relief now,” said Fevella (R, Ewa Beach-Ocean Pointe-Iroquois Point). “We’re talking about working-class families, we’re talking about the middle class.”
When all 13 senators were done with opening remarks, Rep. Chris Todd, who chairs the House Finance Committee and the House conference committee on the budget bill, quipped, “You guys good?”
That prompted chuckling from some House members including committee Vice Chair Rep. Jenna Takenouchi (D, Pacific Heights-Nuuanu-Liliha) and Rep. Joe Gedeon (R, 91直播 Kai-Kalama Valley).
Todd (D, Hilo-Keaau-Ainaloa) said in a statement on Monday that he hopes to soon reach a resolution that “provides the maximum tax benefit for working-class families while preserving essential government services for those same families.”
