Hawaii Council On Revenues Trims Its State Tax Collection Estimate
Troubling signs in the state economy are appearing but construction remains strong.
The Council on Revenues is projecting that state government will have about $65 million less to spend this fiscal year than lawmakers and Gov. Josh Green’s administration had anticipated during the past legislative session.
That won’t amount to a budget crisis because the state is still expected to take in about $9.5 billion in various kinds of taxes this year.
But the new estimate will make Green’s job just a bit harder as he considers vetoing one or more bills to reduce state spending.
The council, which is tasked with estimating how much the state will receive in tax revenues each year, had predicted in March that state tax collections would grow by 4% in the fiscal year that ends June 30. But members voted unanimously Wednesday to trim that projection to 3.3% growth.
House Finance Committee Chairman Kyle Yamashita said in a written statement Wednesday that “we are aware of the decrease made by COR today and we will be in conversation with Budget and Finance to get firm numbers from them by next week hopefully.”
Senate Ways and Means Committee Chairman Donovan Dela Cruz and Green did not respond to requests for comment Wednesday afternoon.
Final tax collection figures for May were not yet available on Wednesday, but the Tax Department reported general excise tax, hotel room tax and income tax collections all appear to be running behind last year’s pace.
However, corporate income tax collections have made up much of the loss in personal income taxes as high-income taxpayers have changed their behavior to reduce their federal tax liability, according to the department. More taxpayers now use pass-through entities such as corporations to pay their income taxes, which has temporarily increased the state’s corporate tax take.
Council members cited economic concerns ranging from high interest rates to lagging visitor arrivals as reasons for caution, but decided to stick with their earlier estimate of 4.8% growth in state tax collections for the fiscal year that begins July 1.
Council member Carl Bonham said there were about 20,000 fewer average visitors per day in Hawaii in March compared to a year earlier, and he estimated there were about 10,000 fewer average daily visitors in April.
“If you do the math, excise tax should have fallen significantly in the first six months of the year,” but he said that hasn’t happened yet. He said the anticipated drop in excise tax collections only seems to be appearing in the data now.
Kristi Maynard, the council’s vice chair, said the visitor count has been running about 3% lower than last year, and the airlines have been expressing concern that people are cutting spending.
Council member Wendell Lee said state excise tax collections have gotten a boost as inflation increased prices which in turn increased tax collections, “but how far will that take us is my concern. I just feel that there’s a downturn in spending that’s going to occur.”
Still, council members continued to cite construction as a significant bright spot in the economy. Bonham said the state reached a record high construction job count in April, with over 41,000 construction workers.
“We’ve never seen that number before,” he said, with major federal projects in the works at Pearl Harbor, and the Lahaina recovery effort also on the horizon.
The council reaffirmed its March projections for 4.5% growth in tax collections in fiscal year 2026, and 4% for fiscal year 2027.
