News Release
Phone: (808) 587-1540
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For Immediate Release: April 19, 2003
Income Tax Revenues Plummet -- Tax Credits Blamed

HONOLULU - Figures just released by the Department of Taxation reveal that individual and corporate income tax revenues continue to fall despite a relatively strong economy.

Estimated taxes by corporations and individuals for the first nine months of the current fiscal year are down by 109% and 3%, respectively. Amounts received through April 17 indicate that the trend is continuing.

This is in sharp contrast to income taxes withheld from individuals' wages, which have increased by 1.9% during the same period despite a 5% rate reduction that took effect January 1, 2002. Also, excise tax revenues are up by more than 10%.

Because the excise tax applies to all kinds of transactions, it is generally considered the best single indicator of economic activity in the state.

The anomaly of plummeting tax revenues in a strong economy appears to be the result of tax credits being claimed primarily by corporations and high-income individuals.

This connection was first identified and quantified by the Council on Revenues last month.

Corporate income tax receipts have actually fallen below the amount of tax refunds being claimed by corporations. For the first nine months of this year, $26.4 million in receipts were more than offset by refunds of $40.8 million. Last year, receipts exceeded refunds by $19.7 million. For the first three months of this calendar year, there were net corporate income tax revenues of MINUS $25.4 compared to a positive $18.7 million for the same period last year.

"The implications of these new numbers are huge. We now know with some certainty that various tax credits have proven to be far more generous than anyone ever dreamed would be the case," said State Tax Director Kurt Kawafuchi.


For more information, contact:
Kurt Kawafuchi
Director of Taxation
Phone: (808) 587-1786