Government confronts a difficult balancing act when it tries to help working families make ends meet. The statistics about how many of Hawaii’s people struggle to do so look worse with each passing year, so plainly the safety net needs reinforcement. The current minimum hourly rate, $10.10, does not go far enough.
At the same time, their employers also struggle. Many of the smallest businesses in particular can’t afford to shoulder the entire burden of covering the mounting costs of living.
Finding the right formula for that will be the primary mission of the 2020 legislative session, as raising the minimum has been a plank of the majority Democratic Party platform, and a stated priority of leadership this session in particular. So it’s critical that negotiation happen in the coming weeks to resolve the dispute already arising over the issue.
Lawmakers will start to hear some of the complaints about their initial approach in a hearing today on House Bill 2541.
At the heart of this critique is the observation by some social-service advocates that the bill’s promised tax benefits don’t adequately compensate for the lower bump in minimum wage — to $13 hourly by 2024 — lawmakers now propose.
Instead, advocates favor phasing in a hourly minimum wage in the $15-$17 range, a proposal that, while garnering considerable support, ultimately stalled in a conference committee last session.
Along the way, last year’s measure, HB 1191, shifted several times. The bill proposed various formulas such as a $15 minimum unless employees receive health insurance, in which case the minimum drops to $12.50; and a $15 minimum, with $17 paid to public workers. The federal minimum wage is $7.25, but 90% of all minimum-wage earners get higher pay than that.
Clearly, the $13 proposed top rate in the current bill, HB 2541, represents the opening bid, with various groups countering at $17.
What bill sponsors hope to show is that the entire package of initiatives seeking to help those in marginal financial shape — including the minimum-wage increase but also some tax reforms and assistance on affordable housing and child care — will combine to do more than a basic wage hike.
Among the groups poised to testify today, Hawai‘i Appleseed Center for Law and Economic Justice, gave enthusiastic support for some proposed tax changes.
One was making the earned income tax credit refundable, meaning that qualifying taxpayers receive the full amount of the credit, regardless of their actual tax liability. Also, the sunset for the credit has been eliminated so that it will be an enduring benefit.
In addition, the credit for the excise tax paid on food was already refundable but the bill would increase the maximum to $150 per exemption.
The problem is that it would zero out once income reaches $30,000 annually, according to the Appleseed testimony, which would cut many people in need out of that benefit. The organization rightly gave preference to existing law, which instead phases out the credit gradually as earnings increase.
There is variability across different household types: individuals, single parents, married couples with children. But in general the cash value of the credits is far below what a more generous minimum wage would yield — hundreds of dollars as opposed to thousands.
The Legislature is correctly trying to thread a needle by raising the minimum wage to at least narrow the gap from the income side, while reducing what drains away in taxation at the other end. Compromise here will be essential.
The hope that once a middle path is settled, families will be able to stand on firmer financial ground.
