Historical Hawaii Tax Policy Information

in Hawaii

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The historical Hawaii tax policy information below is presented as it was written on Ballotpedia in 2015. For more current information regarding tax policy, click here.

Tax policy in Hawaii

Tax rates in 2015

Personal income tax: 1.4% to 11%

State sales tax: 4%

Corporate income tax: 4.4% to 6.4%

Tax revenues in 2014

Total tax collections:[1] $6.033 billion

Tax collections per capita:[1] $4,249

Rank:[1] 6

Total state expenditures • State debt • Hawaii state budget and finances

Hawaii generates the bulk of its tax revenue by levying a personal income tax and a general excise tax (GET), which is a tax levied on the revenue of all businesses. The state derives its constitutional authority to tax from Article VII of the state constitution.^[2][3]

Tax policy can vary from state to state. States levy taxes to help fund the variety of services provided by state governments. Tax collections comprise approximately 40 percent of the states' total revenues. The rest comes from non-tax sources, such as intergovernmental aid (e.g., federal funds), lottery revenues and fees. The primary types of taxes levied by state governments include personal income tax, general sales tax, excise (or special sales) taxes and corporate income tax.^[4]

Tax rates[edit]

Personal income tax[edit]

See also: Personal income tax

The personal income tax rates in Hawaii for the 2015 tax year ranged from 1.4 percent to 11 percent. An individual's tax liability varies according to his or her tax bracket. A tax bracket is the income range to which a tax rate applies. In Hawaii, there are 12 income tax brackets.^[6][7][8]

The table below summarizes personal income tax rates for Hawaii and neighboring states in 2015. Numerical rankings are tabulated by excluding states with no personal income tax (as well as New Hampshire and Tennessee, which charge income tax only on dividends and interest) and are based on the highest possible tax rate for which an individual might be liable. Because some states are excluded from the rankings and a few share common uppermost rates, there are 34 numerical rankings, with 1 indicating the highest uppermost rate and 34 indicating the lowest.^[7]

Personal exemptions[edit]

States that collect a personal income tax allow individuals to claim personal exemptions on income taxes each year. The personal exemption indicates that only a person's income above a certain level is subject to taxation. ^[9]

Exemptions work by reducing the amount of an individual's taxable income. Both state and federal taxes allow exemptions. The state exemptions for Hawaii and other West Coast states as reported by the Tax Policy Center are reported in the chart below.^[10]

In Hawaii, state personal exemptions for single filers were equal to $1,040, which was highest among some West Coast states (and Alaska) that levied income taxes. Exemptions for those filing as a married couple were equal to $2,080 in 2015. Hawaii regulations also allow filers to receive exemptions for dependents. These exemptions were equal to about $1,040 in 2015.^[11]

Capital gains tax[edit]

See also: Capital gains tax

A capital gains tax is a tax levied on the profit gleaned from the sale of a capital asset. Examples of capital assets include stocks, businesses, land parcels, homes, personal items and more. Capital gains are taxable at both the federal and state levels. While the federal government taxes capital gains at a lower rate than regular personal income, states usually tax capital gains at the same rates as regular income. In Hawaii, the uppermost capital gains tax rate was 7.3 percent. The combined uppermost federal and state tax rates totaled 29.4 percent, ranking tenth highest in the nation.^[12][13][14]

The table below summarizes uppermost capital gains tax rates for Hawaii and neighboring states in 2015.

General excise tax[edit]

See also: Excise tax

Almost all states employ a statewide sales tax, which ranges from 2.9 percent in Colorado to 7.5 percent in California. Additionally, many states allow the levying of local sales taxes, which are then added to the state's tax. Hawaii does not have a state sales tax. It has a general excise tax.

Hawaii's state general excise tax was 4 percent in 2015. The average local tax was about 0.35 percent, meaning that the average combined tax was about 4.35 percent. Compared to the sales tax rates of other states, Hawaii's was the 45th highest combined sales tax rate in the country in 2015, and was the median, or third highest, among its neighboring states. The table below displays the state tax rates, average local tax rates, and average combined tax rates for Hawaii and several other West Coast states, including Alaska.

The general excise tax rate in Hawaii for tax year 2015 was 4 percent. The table below compares Hawaii's general excise tax rate with the sales tax rates of neighboring states in 2015. The table also notes the state's policy with respect to types of items commonly exempted from sales tax (i.e., food, prescription drugs and nonprescription drugs).^[15]

Excise taxes[edit]

See also: Excise taxes

Excise taxes, also known as selective sales or differential commodity taxes, are levied for the sales of specific goods or services. Excise taxes are considered indirect taxes because they are not charged directly to individuals. In most cases, the excise tax is paid by the producer or seller of an item. The cost of the tax is then included in the sale price of the item and passed on to the consumer. The tables below provide excise tax rates for motor fuel, alcohol and cigarettes in Hawaii and neighboring states. In Hawaii, excise tax revenues comprised 16.2 percent of total tax collections in 2013.^{[16][17][18][19]}

Hawaii also had a general excise tax, which is levied on all business activity.

Corporate income tax[edit]

See also: Corporate income tax

Corporate income tax is the tax levied by a state on a company's profits. In tax year 2015, Hawaii levied a 4.4 percent to 6.4 percent corporate income tax. The table below lists the corporate income tax rates for Hawaii and neighboring states in 2015.^[20][21]

Business tax climate[edit]

In October 2014, the Tax Foundation released a report evaluating business tax systems in the states for fiscal year 2015. The report's authors graded the states by analyzing more than 100 variables in five general tax areas: corporate taxes, personal income taxes, sales taxes, unemployment insurance taxes and property taxes. States were scored on a scale of zero to 10, with a score of zero indicating the worst business tax structure and a score of 10 indicating the best. States were then ranked on a scale of one to 50, with a ranking of one indicating the state with the best business tax climate and a score of 50 indicating the state with the worst.^[22]

In fiscal year 2015, Hawaii's business tax climate was ranked 30th in the nation. The table below provides scores and rankings for Hawaii and neighboring states. To access the full report, click here.^[22]

Property tax[edit]

See also: Property tax

Most often, property tax applies to real estate, although some states levy property taxes on other types of personal property, such as automobiles. Generally speaking, an individual's property tax liability is determined by the tax rate and the tax base, which is "determined by both the assessed value of the property and ... the share of the assessed value that is subject to tax." To learn more about property taxes, including tabulation methods, see this page.^[23][24][25]

Property taxes comprise the lion's share of local government revenues. In 2010, property taxes accounted for 75 percent of the tax revenues collected by local government entities (such as cities, counties, school districts, etc.). States, on the other hand, generate very little revenue from property taxes. Property tax rates can vary substantially from locality to locality within a state.^[23][24]

The table below provides the mean amount of property taxes paid, as well as property tax as a mean percentage of home value, for Hawaii and neighboring states for 2012. In terms of mean property taxes paid, Hawaii ranked lowest when compared to nearby states.^[23]

The table below lists per capita state and local property tax collections for Hawaii and neighboring states for fiscal year 2012. According to the Tax Foundation, which compiled the data below, Hawaii ranked 38th in the country in terms of property tax collections per capita.^[26]

Estate and inheritance taxes[edit]

See also: Estate and inheritance taxes

Estate and inheritance taxes are levied on the property of deceased individuals (decedents). Generally speaking, an estate tax is applied to the value of a decedent's property and is paid from the estate before distribution to any heirs. By contrast, an inheritance tax is paid by the heir or heirs of a decedent's assets.^[27][28][29]

Hawaii is one of 15 states (plus the District of Columbia) that levies an estate tax. In addition, Hawaii taxpayers are also liable for the federal estate tax. The table below summarizes the estate tax rates for Hawaii and neighboring states in 2015.^[29]

Tax revenues[edit]

Tax collections by source as a percentage of total tax collections in 2013.

See also: Hawaii state budget and finances

The table below summarizes general fund revenue sources for Hawaii and neighboring states in 2013. All figures are rendered in millions of dollars (for example, $1,500 translates to $1,500,000,000). Per capita figures have not been abbreviated.^[30]

The table below lists tax collections by source as a percentage of total collections for Hawaii and neighboring states in 2013.^[3]

See also[edit]

• Tax policy in Hawaii

Footnotes[edit]

v • e Budget policy Budget background Government budgets • Cost of state transparency websites • State budget issues • Public employee salaries • Public pensions • States with spending online • Glossary of state budget terms • Total state expenditures • State spending by function as a percent of total expenditures State budget and finance pages Alabama • Alaska • Arizona • Arkansas • California • Colorado • Connecticut • Delaware • Florida • Georgia • Hawaii • Idaho • Illinois • Indiana • Iowa • Kansas • Kentucky • Louisiana • Maine • Maryland • Massachusetts • Michigan • Minnesota • Mississippi • Missouri • Montana • Nebraska • Nevada • New Hampshire • New Jersey • New Mexico • New York • North Carolina • North Dakota • Ohio • Oklahoma • Oregon • Pennsylvania • Rhode Island • South Carolina • South Dakota • Tennessee • Texas • Utah • Vermont • Virginia • Washington • West Virginia • Wisconsin • Wyoming Tax policy background Personal income tax • Sales tax • Corporate income tax • Property tax • Excise taxes • Estate and inheritance taxes • Capital gains tax State tax policy pages Alabama • Alaska • Arizona • Arkansas • California • Colorado • Connecticut • Delaware • Florida • Georgia • Hawaii • Idaho • Illinois • Indiana • Iowa • Kansas • Kentucky • Louisiana • Maine • Maryland • Massachusetts • Michigan • Minnesota • Mississippi • Missouri • Montana • Nebraska • Nevada • New Hampshire • New Jersey • New Mexico • New York • North Carolina • North Dakota • Ohio • Oklahoma • Oregon • Pennsylvania • Rhode Island • South Carolina • South Dakota • Tennessee • Texas • Utah • Vermont • Virginia • Washington • West Virginia • Wisconsin • Wyoming Comparative analysis of state debt Federal outlays to state government (2014-2017) • State tax revenue projections and shortfalls (2020-2021) • Proportion of state government general revenues from the federal government (2014-2018) • State debt per capita (2014-2018) • State unfunded public pension liabilities, 2003-2018