Proposed Trump tax cuts will overwhelmingly benefit the top 1 percent
As millions of Americans file their taxes this April, both the U.S. House and Senate have passed budget resolutions that open the pathway for a massive tax giveaway for the wealthiest people in the country. Through these resolutions, the Republican majority has advanced a budget framework that would extend most of the provisions in the Tax Cuts and Jobs Act (TCJA), President Trump’s signature first term tax policy from 2017.
If made permanent, the provisions in this policy would overwhelmingly benefit the top 1 percent wealthiest taxpayers in the country while doing almost nothing for those at the bottom. The proposal would give away an average of $47,000 dollars in tax cuts to Hawaiʻi households in the top 1 percent, compared to just $80 for the bottom 20 percent.
Figure 1. Average Projected Tax Change from TCJA 2.0, by Income Group, Hawaiʻi, 2026
The average tax change projected for Hawaiʻi residents in 2026 should Congress enact Trump’s plan to make most of the 2017 Tax Cuts and Jobs Act permanent, broken out by income group.
Source: Institute on Taxation and Economic Policy.
In all, extending the TCJA tax cuts will cost the federal government over $4.6 trillion. However, Republicans are using an accounting trick to make it seem like the cuts will not reduce tax revenue or add to the deficit by changing the way they are calculated in the budget. Instead of factoring in the actual cost of the TCJA going forward, they are assuming that the tax cuts have already been made permanent. This makes the cost of these cuts appear to be zero.
Just as in Trump’s first term, the brand new TCJA tax cuts will come at devastating cost to government programs and services. The House version of the proposal calls for spending cuts of $1.5 trillion, while the Senate version asks for $4 billion in cuts. Either version would impact programs like Medicaid and the Supplemental Nutrition Assistance Program (SNAP).
Over 400,000 Hawaiʻi residents depend on Medicaid or the Children’s Health Insurance Program (CHIP), and around 160,000 Hawaiʻi residents are enrolled in SNAP. Scaling back these critical programs could leave hundreds of thousands of Hawaiʻi community members without medical insurance or enough food on the table to feed their families.
The State of Hawaiʻi must work to preserve its programs and services in the face of imminent cuts. There are a number of revenue options the state has at its disposal, including:
Raising the capital gains rate on investments like stocks and bonds. Around 70 percent of the capital gains in Hawaiʻi go to people earning over $400,000. These capital gains are taxed at a maximum rate of 7.25 percent, but they should be taxed at the same rate as ordinary income.
Increasing the conveyance tax on the sale of high-end, luxury real estate. Out-of-state home-buyers and people purchasing mansions as investments should pay a higher tax rate that more accurately compensates the public for the impact these investment purchases have on inflating the housing market and raising the cost of living for locals.
Closing tax loopholes that are exploited by multinational corporations through Worldwide Combined Reporting.
These three options alone could generate over $150 million each year. Other options exist as well, and state lawmakers are going to have to get creative and bold in order to fill the extreme funding gaps that will be left open should the TCJA 2.0 become law.
