Hawaii minimum wage increase; tax credits to be refunded

On June 22, 2022, Governor David Ige signed two bills into law that were passed by Hawaii’s Legislature. These laws increase Hawaii’s minimum wage and change Hawaii’s earned tax credits from nonrefundable to refundable, which will provide all taxpayers with a $100 or $300 tax refund.

Living wages, tax benefits

Hawaii’s minimum wage was increased, and Hawaii’s earned tax credit was changed by House Bill 2510, which is now known as Act 114. Act 114 increases Hawaii’s minimum wage from the current $10.10 per hour to $12 per hour beginning on October 1, 2022. Thereafter, scheduled increases will be $14 per hour on January 1, 2024, $16 on January 1, 2026, and $18 on January 1, 2028. These increases come four years after Hawaii’s minimum wage was increased to $10.10 in 2018. Since 2018, Hawaii’s Legislature has considered numerous measures to increase the minimum wage to cover what economists argued was Hawaii’s “living wage,” or the amount wage earners needed to afford to live in Hawaii. That figure is now close to $18 per hour.

Included in Act 114 is an amendment to Hawaii’s Earned Income Tax Credit law. Currently, Hawaii Revised Statutes, § 235-55.75, treats Hawaii’s earned income tax credit as nonrefundable. Act 114 makes that tax credit refundable beginning with the 2022 tax year. For prior year tax credits, taxpayers will be allowed to carry forward their previously claimed non-refundable tax credits through 2024. Act 114 took effect upon Governor Ige’s signature.