Making Hawaii a more affordable place to live is top of mind for many across the state. Many of us know someone who has had to move away, or make adjustments and sacrifices to stay.

Some of us may even know someone who has experienced houselessness recently, while others may have experienced this directly.

As our high cost of living continues to push families into poverty, our lawmakers must look for ways to ease some of the financial burden that comes with living, working and raising a family in Hawaii.

This year, our state legislators took a significant step forward in making good on the promise of a happy, healthy, and economically stable life in the islands by expanding the state level earned income tax credit or EITC.

Created in 2017, this state tax credit provides an additional percentage of the federal EITC as targeted, direct economic relief to working families.

With the passage of House Bill 954, the state will increase the value of its state EITC from 20% of the federal EITC to 40%. This gives Hawaii one of the strongest state level EITCs in the nation, behind only California, Maryland, and Washington, D.C.

With this expanded credit, Hawaii will now be a national leader in providing economic relief to the low and moderate-income working families that need it most.

The EITC provides relief to working families by reducing the taxes they owe and, for those with little or no tax liability, increasing the size of their tax refund. This extra cash-in-hand allows families to meet their basic needs for things like food, housing, transportation and childcare.

In 2018 alone, the federal EITC lifted 5.6 million people out of poverty across the nation, 3 million of which were children. In 2021, more than 100,000 Hawaii taxpayers claimed the EITC, bringing more than $200 million back into our local economy.

The EITC is largely viewed as one of the most effective means of both reducing poverty and increasing economic security that the government has at its disposal.

Since its creation in 1975, the federal EITC has been shown to deliver significant long-term improvements in the health, education, and economic outcomes for children in families that receive it. It also provides immediate relief for parents raising kids by alleviating the financial pressure and chronic stress associated with not being able to make ends meet.

By doubling the state credit’s value, the Legislature is recognizing the powerful impact that refundable tax credits like the EITC can provide for families who are working, but still struggling to make ends meet.

In a similar vein, HB 954 also doubled the value of the refundable food/excise tax credit and made improvements to the child and dependent care tax credit.

These two credits, like the EITC, are refundable and put cash directly into the hands of working families, so they can offset the costs of food and childcare.

Taken together the three improvements made by HB 954 represent one of the most progressive tax policy changes in recent memory, as a majority of their benefits are targeted directly to low and middle-income households.

But making Hawaii a truly affordable place for all is an evolving challenge that will require us to leverage all the tools at our disposal.

For instance, during the pandemic, the federal government expanded the size of the federal Child Tax Credit, which provides additional economic assistance to families with children directly through the tax system.

The Legislature and governor deserve congratulations for proposing and passing this expansion.

The federal expansion reduced child poverty by a whopping 40% and lifted 2.9 million children out of poverty in 2021. Currently, 12 states have created their own state level Child Tax Credits that complement the federal credit.

Given the demonstrable impact of the expanded Child Tax Credit and other refundable credits, we should take a serious look at all the ways we can support working families. This should include creating a state level Child Tax Credit or “Keiki Credit” that acknowledges the unique financial challenges associated with raising a family in Hawaii.

Still, the Legislature and Gov. Josh Green deserve congratulations for proposing and passing this expansion of the EITC, refundable food/excise tax credit, and child and dependent care tax credit.

Together, the changes implemented by HB 954 will put thousands of working families on a path to greater economic security and will get us closer to a Hawaii that’s truly affordable for all. This is progress that can and must be continued in subsequent legislative sessions.