Hawaii’s Minimum Wage Must Rise, Unused Earned Tax Credits Must Be Refunded, and All Taxpayers Must Receive Refunds – Employee Benefits and Compensation

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

Hawaii’s minimum wage was increased and Hawaii’s earned tax credit was amended by Bill 2510, which is now Bill 114. Bill 114 raises Hawaii’s minimum wage by 10.10 $ from the current time to $12.00 effective October 1, 2022. Thereafter, planned increases will be $14.00 on January 1, 2024, $16.00 on January 1, 2026, and $18.00 $ on January 1, 2028. These increases come four years after Hawaii’s minimum wage was raised to $10.10 in 2018. Since 2018, the Hawaiian legislature had considered numerous measures to raise the minimum wage to cover what economists considered Hawai’i’s “living wage” – the amount workers needed to afford to live in Hawai’i. This figure is now close to $18.00 per hour.

Law 114 includes an amendment to the Hawaii Earned Income Tax Credit Law. Currently, Hawai’i Revised Statutes, §235-55.75 treats the Hawai’i Earned Income Tax Credit as non-refundable. Bill 114 makes this tax credit refundable as of tax year 2022. For prior year tax credits, taxpayers will be allowed to carry forward non-refundable tax credits previously claimed by the taxpayer until 2024. Law 114 went into effect upon Governor Ige’s signature.

Governor Ige also signed Senate Bill 514 as Bill 115, which allocated general state funds for a tax refund for all taxpayers filing for 2021. Based on the returns income filed for 2021, individuals earning less than $100,000 and couples earning less than $200,000. will receive a tax refund of $300; individuals earning $100,000 or more or couples earning $200,000 or more will receive a $100 refund. The law comes into force on July 1, 2022.

Conclusion: Employers should prepare for the increase to $12.00 per hour before October 1, 2022 and audit employee compensation to ensure all employees receive more than minimum wage after October 1, 2022 Employers must also adjust and revise existing pay rates and schedules to account for wage compression that could be caused by the $1.90 wage increase and the $2.00 wage increases in over the next six years. Employers of unionized employees should also plan wage increase requests that will include anticipated minimum wage increases.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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