Who benefits most from Hawaii’s Tax Credits?

Dongliang Wu, Research Statistician
January 2022

This post highlights some interesting trends that emerged in the 2019 Report Tax Credits Claimed by Hawaii Taxpayers.

Figure 5 from the report (see below) shows how welfare enhancing tax credits varies by income and some interesting results emerge:

  • The Refundable Food/Excise Tax Credit distributes the most benefits to the taxpayers with the lowest reported incomes in dollars distributed per capita. This credit is the largest source of credits for taxpayers with a Hawaii AGI of $20,000 or less.
  • Hawaii’s nonrefundable EITC is a more important credit for taxpayers with a Hawaii AGI of $20,000 to $40,000. This is in part due to the nonrefundable nature of the EITC since lower income households are less likely to have a tax liability to which they can deduct the nonrefundable credit. Because the Food/Excise tax credit is refundable, even taxpayers with little to no tax liability can claim the credit. The work requirement associated with the EITC also ensures that the recipient has some earnings.
  • The Tax credit for child and dependent care expenses increases when income goes up, likely reflecting that higher income taxpayers can afford higher dependent care expenses.
Figure 5 - Average Per Capita Smounts of Selected Credits Claimed by Individuals in Tax Year 2019