Hawaiʻi could raise its capital gains tax to 9%

Devin Thomas, a senior analyst at the Hawaiʻi Appleseed Center for Law & Economic Justice, explained that because capital gains are taxed at a flat rate, it's not fair to those with lower incomes.

“In Hawaiʻi, capital gains are taxed at a flat 7.25 percent rate regardless of what your income is. So even if somebody is a high earner and they belong to the $200,000-plus income tax bracket, they would still pay that lower rate of 7.25 percent,” he said.

“This fundamentally is not a fair way to structure the tax because it means that people who make a lot of money from investment income are able to get a bit of a tax break and they pay a lower tax rate compared to working families at the lower end of the income scale, who usually don't have any investments to earn capital gains from at all.”

He added that those who pay capital gains taxes are likely higher income earners. In 2021, for those earning $400,000 a year, a third of that income was from capital gains.

For those earning about $85,000 a year, only about 2 percent of that was from capital gains.