How a second Trump presidency could impact the pocket books of Hawaiʻi’s working families

With President-elect Trump preparing to return to the White House in 2025, it’s worth examining how his proposed policies could impact Hawaiʻi’s  economy, tax system and the household budgets of local working families.

During his first term as president (2016–2020), Trump worked with the Republican majority in Congress to pass the Tax Cuts and Jobs Act (TCJA). This act lowered taxes in a number of ways that mostly helped corporations and wealthy Americans.

  • Lowered individual income tax rates: The TCJA reduced the tax rates for most income brackets, with the majority of the benefits going to higher-income taxpayers. For example, the top income tax rate dropped from 39.6 percent to 37 percent.

  • Reduced taxes on corporations: The corporate tax rate was lowered from 35 percent to 21 percent, one of the most significant cuts in the TCJA. 

  • Increased the standard deduction: The standard deduction was nearly doubled. For example, the standard deduction for single filers went from $6,350 to $12,000, and for married couples filing jointly, it rose from $12,700 to $24,000. This helped middle- and low-income earners, who tend to claim the standard deduction instead of itemizing their expenses.

  • Expanded the child tax credit: The child tax credit was raised from $1,000 to $2,000 per child, giving low- and middle-income families more money to make ends meet. 

Overall, the top 1 percent of taxpayers have benefited the most from the TCJA. For the 2025 tax year, they will receive an average tax cut of $61,000. Meanwhile, middle-income households (earning between $53,400 and $91,700) will see an average tax cut of just $1,680. 

Research shows that instead of lifting up workers and the economy, the TCJA slowed down job and business growth. In addition, it caused wages in the U.S. to drop by 0.21 percentage points

Trump’s proposed tax agenda for his second term follows the same blueprint laid out by the TCJA. Once again, this will mean more tax cuts for the wealthiest 5 percent of Americans—but this time around, it will also mean tax increases for everyone else.

Figure 1: Trump tax proposals would cut tax rates for the richest 5 percent of households while raising taxes for all other households.

Source: Institute on Taxation and Economic Policy, October 2024.

If Trump carries out his tax proposals, Americans who earn less than $360,000 will see their taxes increase. This plan falls in line with the goals of Project 2025.

Regardless of whatever rhetoric candidate Trump used on the campaign trail , President-elect Trump has recently embraced key economic points within Project 2025, a sweeping, rightwing policy blueprint. 

Project 2025 proposes to slash income and corporate taxes for the wealthy, while leaving low- and middle-income households on the hook for their taxes.

In the long term, Project 2025 looks to eliminate federal income taxes entirely, while raising consumption taxes that people pay on goods. This will move even more of the tax burden to low- and middle-income people, who spend a larger portion of their budget on basic necessities compared to the wealthy.

Trump has also announced plans to dramatically raise tariffs on imported goods. A growing number of economists have warned that this will make goods across the U.S. significantly more expensive. One study found that Trump’s proposed tariffs would cause consumer prices to skyrocket by $1,900 to $7,600 per household.

Hawaiʻi’s cost of living is already the highest in the U.S., and price increases would hit local families especially hard. Fortunately, there are proven solutions that can put more money in the pockets of local families, giving them the economic security they deserve.

How Hawaiʻi Can Prepare

In 2024, Hawaiʻi’s legislature passed House Bill 2404, signed into law by Governor Green as Act 046. This bill will provide tax breaks for households across the income spectrum through upward adjustments to state income tax brackets and an increase in the standard deduction. While these changes will provide some tax relief to low- and moderate-income working families,  they will not deliver enough money to significantly change a families’ living conditions or keep struggling residents out of poverty. People who earn under $53,000 will get an average tax cut of $674, going down to just $335 for people earning less than $27,000.

There are better options available to Hawaiʻi’s policymakers for helping its families make ends meet. Some of these policies, like providing universal free school meals, are discussed elsewhere, while this blog post focuses on tax policy.

  1. Create a State Child Tax Credit: The federal child tax credit reduced child poverty in the U.S. by 40 percent in 2021, when it was temporarily expanded to help struggling families during the height of the COVID pandemic. Hawaiʻi can and should enact its own child tax credit, providing households with $650 for each child under the age of 18. This money could be freely used for food, housing, transportation, or anything else that a household needs and is a proven, cost-effective way to keep families afloat in hard times.

  2. Raise Revenue to make Hawaiʻi’s Future Financially Secure: Tariffs and tax cuts for the wealthy will very likely have a harmful impact on Hawaiʻi’s economy. Legislators should consider raising revenue to support existing government programs and services, along with new investments that need to be made. 

    There are two simple methods the state could use to collect more tax revenue without hurting low- and middle-income residents: closing the capital gains tax loophole and increasing the conveyance tax on high-value homes. These tax changes could potentially generate hundreds of millions of dollars for Hawaiʻi and its people.

Hawaiʻi’s state policymakers should take immediate action to bolster the economic situations of local residents in the face of President-elect Trump’s tax proposals at the federal level, which—if enacted—will make the already high costs of living in Hawaiʻi even more difficult to shoulder.

Devin Thomas

Senior Policy Analyst for Taxes & Budget at Hawaiʻi Appleseed Center for Law & Economic Justice

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