June 23, 2022  |  Articles

Hawai‘i Minimum Wage to Increase, Unused Earned Tax Credits to be Refunded and all Taxpayers to Receive Refunds

Hand Drawing Upward Line Labeled Wage Symbolizing Wage Increase

On June 22, 2022, Governor Ige signed into law two bills passed by Hawai‘i’s Legislature which increase Hawai‘i’s minimum wage and change Hawai‘i’s earned tax credits from nonrefundable to refundable, and which will provide all taxpayers with a $100 or $300 tax refund. 

Hawai‘i’s minimum wage was increased, and Hawai‘i’s earned tax credit was changed by House Bill 2510, which is now Act 114.  Act 114 increases Hawai‘i’s minimum wage from the current $10.10 per hour to $12.00 beginning on October 1, 2022.  Thereafter, scheduled 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 Hawai‘i’s minimum wage had been increased to $10.10 in 2018.  Since 2018, Hawai‘i’s Legislature had considered numerous measures to increase the minimum wage to cover what economists argued was Hawai‘i’s “living wage”–the amount wage earners needed to afford to live in Hawai‘i.  That figure is now close to $18.00 per hour.  

Included in Act 114 is an amendment to Hawai‘i’s Earned Income Tax Credit law. Currently, Hawai‘i Revised Statutes, §235-55.75, treat Hawai‘i’s earned income tax credit as nonrefundable.  Act 114 makes that tax credit refundable beginning with the 2022 tax year. For prior year tax credits, taxpayers will be allowed to carry forward the taxpayer’s previously claimed non-refundable tax credits through 2024.  Act 114 took effect upon Governor Ige’s signature.

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

Bottom Line: Employers should prepare for the increase to $12.00 per hour before October 1, 2022, and check employees’ pay to ensure all employees receive more than the minimum wage after October 1, 2022.  Employers should also adapt and revise existing pay rates and schedules to adjust for wage compression that may be caused by the $1.90 pay increase and the $2.00 pay increases over the next six years. Employers of unionized employees should also plan for wage increase demands which will include the scheduled minimum wage increases.