Hawaii taxpayers can expect less generous tax relief than proposed earlier this year, under legislation positioned for final votes next week at the Legislature.

A few tax credit program changes benefiting lower-income households to the tune of $125 million advanced in a bill approved unanimously Friday by negotiators in the state House of Representatives and Senate.

But bigger and broader Hawaii taxpayer relief proposals this year entertained by lawmakers and promoted by Gov. Josh Green were nixed Friday in favor of the smaller tax credit items.

The agreed-upon tax relief was influenced by recent changes in the state’s financial position, including a reduced estimated revenue surplus that was around $2 billion earlier this year, and a new union contract for public school teachers costing an added $577 million over four years.

“The big surplus did not pan out as planned in the beginning (of the year), but I think we did some really good work for our residents,” said Rep. Daniel Holt (D, Sand Island-Iwilei-Chinatown). “I’m glad the House and Senate came to an agreement to really help our struggling families.”

Holt was co-chair for the House with Rep. Kyle Yamashita (D, Pukalani-Makawao-Ulupalakua) on the conference committee that approved a compromise draft of House Bill 954 Friday.

The original version of HB 954 proposed to increase the value of Hawaii’s earned income tax credit, which reduces the tax burden of low- to moderate-income taxpayers and can provide a tax refund to those with little to no tax liability.

Later, though, other things were added to the bill — mainly general state income tax cuts by boosting tax bracket thresholds, the standard deduction and the personal exemption.

Those three tax cut items were part of Green’s proposal in January to provide Hawaii taxpayers broad tax savings under what he called an “audacious” effort to deliver economic relief to households burdened by Hawaii’s high and rising cost of living.

Green’s proposal also included increasing the earned income tax credit along with a tax credit for low-income renters, the food excise tax credit and a child and dependent care credit in addition to creating a new maximum $500 credit for many public and private school teachers who spend their own money on school supplies.

The cost of these things in Green’s proposal was estimated at $313 million in the next fiscal year, plus around $20 million in each subsequent year to reach $417 million in fiscal year 2029.

Green, in his State of the State speech in January, said his income tax reduction plan would save a family of four in every income tax bracket nearly $2,000 and that lower-income families would see greater savings.

On Friday, HB 954 was amended by the House- Senate conference committee to double the value of the earned income tax credit to 40% of its federal counterpart from an existing 20% while also increasing the food excise tax credit and the child and dependent care credit.

The estimated state cost, and benefit to qualifying taxpayers, is $42 million for the earned income credit, $36 million for the food excise tax credit and $47 million for the child and dependent care credit.

“This tax break over $120 million should be well-needed relief to these families,” Holt said.

Joining Holt and Yama­shita in voting to amend HB 954 Friday were Reps. Luke Evslin (D, Wailua-Lihue), Greggor Ilagan (D, Hawaiian Paradise Park-Hawaiian Beaches-Leilani Estates), Lisa Kitagawa (D, Kaaawa- Kahaluu-Kaneohe), Rachele Lamosao (D, Waipahu), Dee Morikawa (D, Niihau- Hanapepe-Waimea) and Nadine Nakamura (D, Hanalei- Princeville-Kapaa).

Sens. Donovan Dela Cruz (D, Mililani-Wahiawa- Whitmore Village), Gilbert Keith-Agaran (D, Wailuku- Kahului-Waihee) and Kurt Fevella (R, Ewa Beach-Ocean Pointe-Iroquois Point) represented the Senate with Dela Cruz as chair.

Dela Cruz said Senate representatives desired more tax relief but were glad that a compromise was reached.

Friday was the last day for conference committee members in the House and the Senate to agree on final drafts of bills in advance of full House and Senate votes before Thursday’s adjournment of this year’s Legislature.

In another tax bill decision Friday, it was decided not to provide a general tax rebate for Hawaii residents as was done in 2022.

A bill that partly served as a placeholder for such a rebate, HB 40, was held up Friday in a decision led by Yamashita and Dela Cruz.

Lawmakers in 2022 granted one-time rebates of $100 or $300 per resident, including dependents, depending on the size of household income.

Those rebates cost the state about $300 million and were part of satisfying a state constitutional requirement.

The Hawaii Constitution requires that the state put money into at least one of a few specific places when there is at least a 5% general fund surplus in two successive fiscal years.

One of those places is into pockets of taxpayers through a tax refund or credit. The other options are contributions to the state’s emergency budget reserve fund, also known as the “rainy day” fund, for debt repayment and toward post- employment benefits owed to local government workers.

This year lawmakers approved budget appropriations to put $500 million into the rainy day fund in each of the next two fiscal years and $96 million into the retirement benefits fund over the next two fiscal years.

Green did not propose a tax rebate this year, but sought a broad range of tax reductions for residents.

In 2022 the Legislature brought the rainy day fund balance up to about $1 billion with a $500 million contribution and put $300 million into the state’s pension fund.