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A proposal to exempt unemployment benefits from state income tax received important approval on Thursday, with the Senate Committee on Ways and Means unanimously approving the measure.
The exception would be for unemployment benefits, including pandemic unemployment benefits, that Hawaiian residents received between March 1 and December 31, when the coronavirus pandemic caused widespread economic devastation. Unemployed workers whose state income taxes have been withheld by their unemployment insurance schemes could have the amount offset against their total state tax liability for 2020.
Hawaii taxpayers who have already filed their 2020 tax returns would need to file an amended tax return to get the payments back.
Senate Law 614 received overwhelming support from local unions and dozens of residents who provided written testimony of the economic hardship they faced that year as shops and schools closed and tourism decimated.
More than 580,500 Hawaii workers filed jobless claims in 2020, about half of the state’s working population.
“Most workers have lost their health insurance, many are about to be evicted, and many are struggling to provide for their families,” the International Longshore and Warehouse Union, Local 142, wrote in a statement calling on lawmakers to pass the law say goodbye. The union said the extra money could help workers feed their families and boost the economy.
Hawaii is completely taxing unemployment benefits, which may come as a surprise to some residents who now find that they owe state taxes on that assistance. Some states like California and Pennsylvania have permanently exempted unemployment insurance from state income tax, while states like Maryland and Delaware have exempted benefits from 2020 tax due to the pandemic.
The Hawaii Workers Center, which supports the unemployed and low-wage workers, as well as immigrants, said the extra money was desperately needed by residents struggling to survive financially, especially as thousands are still struggling to get benefits from the state employment agency Being inundated with unemployment claims.
Amid financial difficulties, “tuition fees remain to be paid, groceries to be bought, teeth to be checked, cars to be repaired,” the center wrote.
Despite the support, it is not clear how the state will offset the estimated $ 190 million the bill is expected to have in the state’s operating budget in fiscal 2021. The cut was not included in the budget that Governor David Ige put to the legislature this year, which means lawmakers must find ways to plug the hole.
The bill still requires a full Senate vote and House approval before it can be submitted to the governor for resolution.