Relating To Taxation Of Pollution.
HB1375 would create a statewide carbon cashback program by substantially revising Hawaii’s existing environmental response, energy, and food security tax. The bill renames that levy to the environmental response, energy, carbon emissions, and food security tax, expands its stated purpose to reducing greenhouse gas emissions, and phases in large annual increases in the tax on petroleum products and other fossil fuels beginning in 2026. The measure is designed to function as a carbon tax: fossil fuel distributors would pay the higher tax, and the state would use the resulting revenue to support climate-related programs and return most of the proceeds to residents.
The bill establishes a refundable carbon cashback tax credit for qualifying taxpayers, with amounts set by filing status and dependents and scheduled to rise over time through 2035 before gradually declining. If the credit exceeds a taxpayer’s income tax liability, the excess would be refunded, and taxpayers with no liability could still receive payment. The bill also creates a carbon emissions tax and dividend special fund to pay administrative costs and public outreach, and it reenacts the agricultural development and food security special fund, directing a fixed annual amount of tax revenue to agricultural grants, infrastructure, research, inspection, and marketing activities.
In addition to the new tax credit and special funds, HB1375 amends several existing statutes governing how the tax revenue is distributed. It preserves funding for the environmental response revolving fund, energy security special fund, energy systems development special fund, electric vehicle charging, and hydrogen fueling programs, while adding dedicated deposits for agriculture and for administration of the carbon cashback program. It also updates reporting requirements for the Department of Taxation and the Office of Planning and Sustainable Development so the Legislature can monitor implementation, revenues, credit payouts, and the program’s effectiveness.
The general sentiment reflected in the bill text is strongly supportive of carbon pricing as a climate policy and of returning revenue to households in a progressive way. The findings cite economist support, a University of Hawaii study, and the expectation that most households—especially lower-income households—would come out ahead financially. Because there are no committee transcripts or recorded votes provided, there is no documented opposition or floor debate in the available materials.
The main policy tension inherent in the bill is between higher fuel costs and the promise of offsetting rebates. The bill attempts to ease that concern by phasing in the tax gradually, exempting certain aviation and boating fuel revenue destinations, and preserving utility pass-through and recovery mechanisms for some fuel costs. Another notable point is the restoration of the agricultural development and food security special fund, which suggests an effort to pair climate policy with support for local food production and reduced import dependence.
HB1375 would significantly amend Hawaii’s tax code by increasing and renaming the existing environmental response, energy, and food security tax, adding a new refundable income tax credit, and creating two new special funds. It would affect distributors of petroleum products and fossil fuels, individual income taxpayers, the Department of Taxation, the Department of Agriculture, and several existing state funds tied to environmental response, energy, transportation electrification, hydrogen fueling, and agricultural development. The bill also changes the allocation of tax receipts and imposes new reporting obligations on state agencies.
The bill’s stated purpose and findings reflect a favorable view of carbon taxation and revenue recycling, emphasizing emissions reduction, household rebates, and protection for lower-income residents. The text frames the proposal as economically informed and progressive, and it presents the tax credit as a way to offset higher energy prices. No committee testimony or vote history was provided, so there is no recorded legislative sentiment beyond the bill’s own supportive framing.
The central point of contention is likely the higher cost of fossil fuels and the broader economic impact on consumers, businesses, and utilities, even though the bill seeks to offset those costs with refundable credits. Another potential issue is the complexity of administering a phased-in carbon tax, dividend-style credits, and multiple earmarked funds, which is why the bill includes dedicated administrative funding and reporting requirements. The reenactment of the agricultural development and food security special fund may also draw interest from agricultural stakeholders seeking assurance that revenues will support local production and food security priorities.