Hawaiʻi lawmakers considering nation’s highest income tax

Hawaiʻi has suffered a sharp decline in tax revenue as tourism has plummeted during the coronavirus pandemic, prompting lawmakers to search for new sources of income.

The bill includes hikes to the capital gains tax, corporate tax and taxes on high-end real estate sales. The Senate Ways and Means Committee unanimously passed the measure last week.

Sen. Donovan Dela Cruz, the committee’s chairperson, said Hawaiʻi has a budget deficit and the governor has warned he may have to furlough government workers. Dela Cruz said the state has deferred payments to funds for employee pensions and other retiree benefits to keep government running.

“We are in a dire situation and we are depending on our highest earners and those who are purchasing luxury homes to help us with this situation so that we can ensure that critical services go uninterrupted,” said Dela Cruz, a Democrat.

Dale Arthur Head, a retired Pearl Harbor Naval Shipyard worker who lives on Oʻahu, submitted written testimony saying many people have lost their jobs during the pandemic and those who have been blessed with more can afford “this modest increase.”

Taxes on the wealthy have been declining for decades while social programs have been cut, he said.

“It’s not fair to people towards the bottom,” Head said in an interview.

Beth Giesting, the director of the Hawaiʻi Budget and Policy Center, submitted written testimony saying various deductions, exemptions and tax credits mean that Hawaiʻi’s millionaires currently pay an effective tax rate of just 6.8 percent. The bill would increase the amount actually paid by those with high incomes, she said.