Balancing the state budget could require pauses to income tax cut plan

The House Finance Committee also advanced several other bills that aim to increase taxes on wealthier residents. For example, it passed a measure that would increase the tax on capital gains—the money people make from investments—from 7 percent to 9 percent.

Another measure advanced would add a 2 percent surcharge on large estates that are inherited.

Hawaiʻi Appleseed Center for Law & Economic Justice’s Devin Thomas explained that lawmakers are being forced to look critically at the state’s tax code to find new ways of generating revenue. It’s something that doesn’t usually happen during an election year.

“The state is having to reconsider many different taxes, not just an income tax, but also capital gains, right? Other wealth taxes were put forward during the session too, which, you didn't see them get very far in previous years,” Thomas said.

“That's a big change in 2026, and it does feel like people are more receptive to having these conversations around how do we make our tax system fairer?  How do we make sure that money is going to the right places? And you can see that reflected in the bills that are getting passed and amended.”