Economists: Higher Revenue Estimates Do Not Signal Economic Growth In Hawaii
Experts attribute unexpected revenue boost to increased income tax rate for higher-income earners.
Despite 聽that Hawaii鈥檚 economy is slowing down, there鈥檚 one metric that鈥檚 exceeding expectations: state tax collections for the 2019 fiscal year, which ends June 30, are predicted to increase by 4.7% over the previous year.
It鈥檚 a big upward adjustment by the Hawaii聽, a panel of tax experts and economists that provides projections for state officials who craft the budget.
The council had predicted a 3 percent increase, so bumping to 4.7 percent means a lot more money. It鈥檚 an increase of about $115 million, to approximately $7.115 billion from just less than the $7 billion the council predicted in March.
The problem is the forecast doesn鈥檛 mean the council thinks the state鈥檚 economy is humming along better than before.
To the contrary, in a letter to Gov. David Ige, the council attributed the new, rosy forecast to a surge in income taxes collected in April, which were higher than expected due to an increase in the state income tax rate for higher income taxpayers.
鈥淭his is not some bump in economic activity,鈥 said Tom Yamachika, president of the Tax Foundation of Hawaii, a policy think tank. 鈥淚t鈥檚 that they raised the tax rate.鈥
Ige has two more controversial bills on his desk that could generate even more revenue if he doesn鈥檛 veto them. One measure, which lets platforms like Airbnb serve as tax collector for the state, is projected to raise about $46 million annually, and a bill to tax real estate investment trusts could generate as much as $9 million to $10 million annually.
Carl Bonham, a Council on Revenues member who also directs the University of Hawaii Economic Research Organization, stressed that the council鈥檚 upward revision is just for one year.
鈥淭he basic view is that the economy has slowed down quite a bit,鈥 he said.
Among the state鈥檚 more troubling economic trends is a declining population, which Hawaii has experienced for the past two years, despite a historically low unemployment rate.
鈥淭hat by itself is going to slow down the growth of the economy鈥 said Jack Syderhoud, an economist who serves on the council
Another troubling trend: It鈥檚 taking more and more visitors to generate the same economic benefits. According to data released Thursday by the Hawaii Tourism Authority, visitor spending on Oahu dipped 1.2% to $626.8 million in April despite 8.7% more visitors. The Hawaii Department of Business, Economic Development and Tourism expects Hawaii鈥檚 visitor numbers to 聽to more than 10.7 million in 2022.
